rich dad poor dad what the rich teach their kids
about money that the poor and middle class do not by robert t kiyosaki to parents everywhere
a child's first and most important teachers and to all those who educate
influence and lead by example [Music] acknowledgements how does a person say thank you
when there are so many people to thank obviously this book is a thank you to my two fathers who
were powerful role models and to my mom who taught me love and kindness the person most responsible
for this book becoming a reality is my wife kim my partner in marriage business and
in life she makes my life complete introduction rich dad poor dad having two dads
offered me the choice of contrasting points of view one of a rich man and one of a poor man
i had two fathers a rich one and a poor one was highly educated and intelligent he had a
phd and completed four years of undergraduate work in less than two years he then went on to
stanford university the university of chicago and northwestern university to do his advanced
studies all on full financial scholarships the other father never finished the eighth grade
both men were successful in their careers working hard all their lives both earned substantial
incomes yet one always struggled financially the other would become one of the richest men
in hawaii one died leaving tens of millions of dollars to his family charities and his
church the other left bills to be paid both men were strong charismatic and influential
both men offered me advice but they did not advise the same things both men believed strongly in
education but did not recommend the same course of study if i had had only one dad i would have
had to accept or reject his advice having two dads offered me the choice of contrasting points of
view one of a rich man and one of a poor man instead of simply accepting or rejecting one or
the other i found myself thinking more comparing and then choosing for myself the problem was that
the rich man was not rich yet and the poor man was not yet poor both were just starting out
on their careers and both were struggling with money and families but they had very
different points of view about money for example one dad would say the love of money
is the root of all evil the other said the lack of money is the root of all evil as a young boy
having two strong fathers both influencing me was difficult i wanted to be a good son and listen
but the two fathers did not say the same things the contrast in their points of view particularly
about money was so extreme that i grew curious and intrigued i began to start thinking for long
periods of time about what each was saying much of my private time was spent
reflecting asking myself questions such as why does he say that and then asking
the same question of the other dad's statement it would have been much easier to simply say
yeah he's right i agree with that or to simply reject the point of view by saying the old
man doesn't know what he's talking about instead having two dads whom i loved forced me
to think and ultimately choose a way of thinking for myself as a process choosing for myself turned
out to be much more valuable in the long run than simply accepting or rejecting a single
point of view one of the reasons the rich get richer the poor get poorer and the middle
class struggles in debt is that the subject of money is taught at home not in school most of
us learn about money from our parents so what can poor parents tell their child about money
they simply say stay in school and study hard the child may graduate with excellent grades
but with a poor person's financial programming and mindset sadly money is not taught in schools
schools focus on scholastic and professional skills but not on financial skills this explains
how smart bankers doctors and accountants who earned excellent grades may struggle financially
all of their lives our staggering national debt is due in large part to highly educated
politicians and government officials making financial decisions with little or no training
in the subject of money today i often wonder what will soon happen when we have millions of
people who need financial and medical assistance they will be dependent upon their families or the
government for financial support what will happen when medicare and social security run out of money
how will a nation survive if teaching children about money continues to be left to parents most
of whom will be or already are poor because i had two influential fathers i learned from both
of them i had to think about each dad's advice and in doing so i gained valuable insight into the
power and effect of one's thoughts on one's life for example one dad had a habit of saying i can't
afford it the other dad forbade those words to be used he insisted i ask how can i afford it
one is a statement and the other is a question one lets you off the hook and the other forces you
to think my soon to be rich dad would explain that by automatically saying the words i can't afford
it your brain stops working by asking the question how can i afford it your brain is put to work he
did not mean that you should buy everything you want he was fanatical about exercising your
mind the most powerful computer in the world he'd say my brain gets stronger every day because
i exercise it the stronger it gets the more money i can make he believed that automatically saying
i can't afford it was a sign of mental laziness although both dads worked hard i noticed
that one dad had a habit of putting his brain to sleep when it came to finances and
the other had a habit of exercising his brain the long-term result was that
one dad grew stronger financially and the other grew weaker it is not much
different from a person who goes to the gym to exercise on a regular basis versus someone
who sits on the couch watching television proper physical exercise increases your chances
for health and proper mental exercise increases your chances for wealth my two dads had opposing
attitudes and that affected the way they thought one dad thought that the rich should pay more
in taxes to take care of those less fortunate the other said taxes punish those who
produce and reward those who don't produce one dad recommended study hard so you
can find a good company to work for the other recommended study hard so you
can find a good company to buy one dad said the reason i'm not rich is because i have you
kids the other said the reason i must be rich is because i have you kids one encouraged talking
about money and business at the dinner table while the other forbade the subject
of money to be discussed over a meal one said when it comes to money play
it safe don't take risks the other said learn to manage risk one believed our home is
our largest investment and our greatest asset the other believed my house is a liability and if your
house is your largest investment you're in trouble both dads paid their bills on time yet one
paid his bills first while the other paid his bills last one dad believed in a company or
the government taking care of you and your needs he was always concerned about pay raises
retirement plans medical benefits sick leave vacation days and other perks he was impressed
with two of his uncles who joined the military and earned a retirement and entitlement package
for life after 20 years of active service he loved the idea of medical benefits and px
privileges the military provided its retirees he also loved the tenure system available
through the university the idea of job protection for life and job benefits
seemed more important at times than the job he would often say i've worked hard for the
government and i'm entitled to these benefits the other believed in total financial self-reliance
he spoke out against the entitlement mentality and how it created weak and financially needy people
he was emphatic about being financially competent one dad struggled to save a few dollars the other
created investments one dad taught me how to write an impressive resume so i could find a good job
the other taught me how to write strong business and financial plans so i could create jobs being
a product of two strong dads allowed me the luxury of observing the effects different thoughts
have on one's life i noticed that people really do shape their lives through their thoughts for
example my poor dad always said i'll never be rich and that prophecy became reality my rich dad
on the other hand always referred to himself as rich he would say things like i'm a rich man
and rich people don't do this even when he was flat broke after a major financial setback he
continued to refer to himself as a rich man he would cover himself by saying there
is a difference between being poor and being broke broke is temporary
poor is eternal my poor dad would say i'm not interested in money or money doesn't
matter my rich dad always said money is power the power of our thoughts may never be measured
or appreciated but it became obvious to me as a young boy that it was important to be aware
of my thoughts and how i expressed myself i noticed that my poor dad was poor not
because of the amount of money he earned which was significant but because of his thoughts
and actions as a young boy having two fathers i became acutely aware of being careful about
which thoughts i chose to adopt as my own should i listen to my rich dad or to my poor
dad although both men had tremendous respect for education and learning they disagreed
about what they thought was important to learn one wanted me to study hard earn a degree and
get a good job to earn money he wanted me to study to become a professional an attorney or an
accountant and to go to business school for my mba the other encouraged me to study to be rich to
understand how money works and to learn how to have it work for me i don't work for money were
words he would repeat over and over money works for me at the age of nine i decided to listen
to and learn from my rich dad about money in doing so i chose not to listen to my poor dad even
though he was the one with all the college degrees a lesson from robert frost robert frost is my
favorite poet although i love many of his poems my favorite is the road not taken
i use its lesson almost daily the road not taken two roads diverged in a yellow
wood and sorry i could not travel both and be one traveler long i stood and looked down one as
far as i could to where it bent in the undergrowth then took the other as just as fair
and having perhaps the better claim because it was grassy and wanted wear though as
for that the passing there had worn them really about the same and both that morning equally lay
in leaves no step had trodden black oh i kept the first for another day yet knowing how way leads
onto way i doubt it if i should ever come back i shall be telling this with a sigh somewhere
ages and ages hence two roads diverged in a wood and i i took the one less traveled
by and that has made all the difference and that has made all the difference over
the years i have often reflected upon robert frost's poem choosing not to listen to my
highly educated dad's advice and attitude about money was a painful decision but it was
a decision that shaped the rest of my life once i made up my mind about whom to
listen to my education about money began my rich dad taught me over a period of 30
years until i was 39 years old he stopped once he realized that i knew and fully understood what he
had been trying to drum into my often thick skull money is one form of power but what is more
powerful is financial education money comes and goes but if you have the education about how
money works you gain power over it and can begin building wealth the reason positive thinking
alone does not work is because most people went to school and never learned how money works
so they spend their lives working for money because i was only nine years old when i started
the lessons my rich dad taught me were simple and when it was all said and done there were
only six main lessons repeated over 30 years this audio book is about those six lessons put as simply as possible just as simply as
my rich dad put forth those lessons to me the lessons are meant not to be answers but guide
posts that will assist you and your children to grow wealthier no matter what happens in a world
of increasing change and uncertainty chapter one lesson one the rich don't work for money the poor
and the middle class work for money the rich have money work for them dad can you tell me how to
get rich my dad put down the evening paper why do you want to get rich son because today jimmy's mom
drove up in their new cadillac and they were going to their beach house for the weekend he took three
of his friends but mike and i weren't invited they told us we weren't invited because we were
poor kids they did my dad asked incredulously yeah they did i replied in a hurt tone my dad
silently shook his head pushed his glasses up the bridge of his nose and went back to reading
the paper i stood waiting for an answer the year was 1956 i was 9 years old by some twist of fate
i attended the same public school where the rich people sent their kids we were primarily a sugar
plantation town the managers of the plantation and the other affluent people such as doctors business
owners and bankers sent their children to this elementary school after grade six their children
were generally sent off to private schools because my family lived on one side of the street i went
to this school had i lived on the other side of the street i would have gone to a different
school with kids from families more like mine after grade six these kids and i would go
on to the public intermediate in high school there was no private school for them or for me
my dad finally put down the paper i could tell he was thinking well son he began slowly if you
want to be rich you have to learn to make money how do i make money i asked well use your head son
he said smiling even then i knew that really meant that's all i'm going to tell you or i
don't know the answer so don't embarrass me a partnership is formed the next morning
i told my best friend mike what my dad had said as best as i could tell mike and
i were the only poor kids in this school mike was also in this school by a twist of
fate someone had drawn a jog in the line for the school district and we wound up in school
with the rich kids we weren't really poor but we felt as if we were because all the other boys had
new baseball gloves new bicycles knew everything mom and dad provided us with the basics like food
and shelter and clothes but that was about it my dad used to say if you want something work
for it we wanted things but there was not much work available for nine-year-old boys
so what do we do to make money mike asked i don't know i said but do you want to be my
partner he agreed and so on that saturday morning mike became my first business partner we spent all
morning coming up with ideas on how to make money occasionally we talked about all the cool guys at
jimmy's beach house having fun it hurt a little but that hurt was good because it inspired
us to keep thinking of a way to make money finally that afternoon a bolt of lightning struck
it was an idea mike got from a science book he had read excitedly we shook hands and the partnership
now had a business for the next several weeks mike and i ran around our neighborhood knocking
on doors and asking our neighbors if they would save their toothpaste tubes for us with
puzzled looks most adults consented with a smile some asked us what we were doing to which we
replied we can't tell you it's a business secret my mom grew distressed as the weeks wore on we
had selected a site next to her washing machine as the place we would stockpile our raw
materials in a brown cardboard box that at one time held ketchup bottles our little pile of used
toothpaste tubes began to grow finally my mom put her foot down the sight of her neighbor's messy
crumpled used toothpaste tubes had gotten to her what are you boys doing she asked and i don't
want to hear again that it's a business secret do something with this mess or i'm going to
throw it out mike and i pleaded and begged explaining that we would soon have enough and
then we would begin production we informed her that we were waiting on a couple of neighbors to
finish their toothpaste so we could have their tubes mom granted us a one-week extension the date
to begin production was moved up and the pressure was on my first partnership was already being
threatened with an eviction notice by my own mom it became mike's job to tell the neighbors to
quickly use up their toothpaste saying their dentist wanted them to brush more often anyway
i began to put together the production line one day my dad drove up with a friend to see
two nine-year-old boys in the driveway with a production line operating at full speed there was
fine white powder everywhere on a long table were small milk cartons from school and our family's
hibachi grill was glowing with red hot coals at maximum heat dad walked up cautiously having to
park the car at the base of the driveway since the production line blocked the carport as he and
his friend got closer they saw a steel pot sitting on top of the coals in which the toothpaste
tubes were being melted down in those days toothpaste did not come in plastic tubes the tubes
were made of lead so once the paint was burned off the tubes were dropped in the small steel pot
they melted until they became liquid and with my mom's pot holders we poured the lead through
a small hole in the top of the milk cartons the milk cartons were filled with plaster of
paris white powder was everywhere in my haste i had knocked the bag over and the entire area
looked like it had been hit by a snow storm the milk cartons were the outer
containers for plaster of paris molds my dad and his friend watched as we carefully
poured the molten lead through a small hole in the top of the plaster of paris cube
careful my dad said i nodded without looking up finally once the pouring was through i put the
steel pot down and smiled at my dad what are you boys doing he asked with a cautious
smile we're doing what you told me to do we're going to be rich i said yup said mike
grinning and nodding his head we're partners and what is in those plaster molds my dad
asked watch i said this should be a good batch with a small hammer i tapped at the
seal that divided the cube in half cautiously i pulled up the top half of the
plaster mold and a lead nickel fell out oh my god my dad said you're casting nickels
out of lead that's right mike said we're doing as you told us to do we're making money my
dad's friend turned and burst into laughter my dad smiled and shook his head along with
a fire and a box of spent toothpaste tubes in front of him were two little boys covered
with white dust smiling from ear to ear he asked us to put everything down and sit
with him on the front step of our house with a smile he gently explained what
the word counterfeiting meant our dreams were dashed you mean this is illegal
asked mike in a quivering voice let them go my dad's friends said they
might be developing a natural talent my dad glared at him yes it is illegal my dad said
gently but you boys have shown great creativity and original thought keep going i'm really proud
of you disappointed mike and i sat in silence for about 20 minutes before we began cleaning up
our mess the business was over on opening day sweeping the powder up i looked at mike and said i
guess jimmy and his friends are right we are poor my father was just leaving as i said that
boys he said you're only poor if you give up the most important thing is that you did something
most people only talk and dream of getting rich you've done something i'm very proud of the
two of you i will say it again keep going don't quit mike and i stood there in silence they were
nice words but we still did not know what to do so how come you're not rich dad i asked because
i chose to be a school teacher school teachers really don't think about being rich we
just like to teach i wish i could help you but i really don't know how to make money
mike and i turned and continued our cleanup i know said my dad if you boys want to learn how
to be rich don't ask me talk to your dad mike my dad asked mike with a scrunched up face
yeah your dad repeated my dad with a smile your dad and i have the same banker
and he raves about your father he's told me several times that your father
is brilliant when it comes to making money my dad mike asked again in disbelief then how come
we don't have a nice car and a nice house like the rich kids at school a nice car and a nice house
don't necessarily mean you're rich or you know how to make money my dad replied jimmy's dad works
for the sugar plantation he's not much different from me he works for a company and i work for the
government the company buys the car for him the sugar company is in financial trouble and jimmy's
dad may soon have nothing your dad is different mike he seems to be building an empire and i
suspect in a few years he will be a very rich man with that mike and i got excited again with new
vigor we began cleaning up the mess caused by our now defunct first business as we were cleaning we
made plans for how and when to talk to mike's dad the problem was that mike's dad worked long hours
and often did not come home until late his father owned warehouses a construction company
a chain of stores and three restaurants it was the restaurants that kept him out late
mike caught the bus home after we had finished cleaning up he was going to talk to his dad when
he got home that night and asked him if he would teach us how to become rich mike promised
to call as soon as he had talked to his dad even if it was late the phone rang at 8 30 pm
ok i said next saturday i put the phone down mike's dad had agreed to meet with us on saturday
i caught the 7 30 am bus to the poor side of town the lessons begin mike and i met with
his dad that morning at eight o'clock he was already busy having been at work for more
than an hour his construction supervisor was just leaving in his pickup truck as i walked up to
his simple small and tidy home mike met me at the door dad's on the phone and he said to wait
on the back porch mike said as he opened the door the old wooden floor creaked as i stepped
across the threshold of the aging house there was a cheap mat just inside the door the mat was there to hide the years of wear from
countless footsteps that the floor had supported although clean it needed to be replaced i felt
claustrophobic as i entered the narrow living room that was filled with old musty overstuffed
furniture that today would be collector's items sitting on the couch were two women both a little
older than my mom across from the women sat a man in workman's clothes he wore khaki slacks and a
khaki shirt neatly pressed but without starch and polished work boots he was about 10 years older
than my dad they smiled as mike and i walked past them toward the back porch i smiled back shyly who
are those people i asked oh they work for my dad the older man runs his warehouses and the women
are the managers of the restaurants and as you arrived you saw the construction supervisor who
was working on a road project about 50 miles from here his other supervisor who was building
a track of houses left before you got here does this go on all the time i asked not always
but quite often said mike smiling as he pulled up a chair to sit down next to me i asked my dad
if he would teach us to make money mike said oh and what did he say to that
i asked with cautious curiosity well he had a funny look on his face at first
and then he said he would make us an offer oh i said rocking my chair back against the wall
i sat there perched on two rear legs of the chair mike did the same thing do you know what the
offer is i asked no but we'll soon find out suddenly mike's dad burst through the
rickety screen door and onto the porch mike and i jumped to our feet not out
of respect but because we were startled ready boys he asked as he pulled up a chair
to sit down with us we nodded our heads as we pulled our chairs away from the wall to sit in
front of him he was a big man about six feet tall and 200 pounds my dad was taller about the same
weight and five years older than mike's dad they sort of looked alike though not of the same
ethnic makeup maybe their energy was similar mike says you want to learn to make money is
that correct robert i nodded my head quickly but with a little trepidation he had a
lot of power behind his words and smile okay here's my offer i'll teach you but i won't
do it classroom style you work for me i'll teach you you don't work for me i won't teach you i can
teach you faster if you work and i'm wasting my time if you just want to sit and listen like you
do in school that's my offer take it or leave it ah may i ask a question first i asked no take it
or leave it i've got too much work to do to waste my time if you can't make up your mind decisively
then you'll never learn to make money anyway opportunities come and go being able to know
when to make quick decisions is an important skill you have the opportunity that you asked for
school is beginning or it's over in 10 seconds mike's dad said with a teasing smile take
it i said take it said mike good said mike's dad mrs martin will be by in 10 minutes after i'm
through with her you'll ride with her to my super and you can begin working i'll pay you 10 cents
an hour and you'll work three hours every saturday but i have a softball game today i said
mike's dad lowered his voice to a stern tone take it or leave it he said i'll take it i replied
choosing to work and learn instead of playing 30 cents later by 9 am that day mike and
i were working for mrs martin she was a kind and patient woman she always said that
mike and i reminded her of her two grown sons although kind she believed in
hard work and kept us moving we spent three hours taking canned goods off
the shelves brushing each can with a feather duster to get the dust off and then re-stacking
them neatly it was excruciatingly boring work mike's dad whom i called my rich dad
owned nine of these little super rats each with a large parking lot they were the
early version of the 7-eleven convenience stores little neighborhood grocery stores where people
bought items such as milk bread butter and cigarettes the problem was that this was hawaii
before air conditioning was widely used and the stores could not close their doors because of the
heat on two sides of the store the doors had to be wide open to the road and parking lot every time
a car drove by or pulled into the parking lot dust would swirl and settle in the store we knew we
had a job as long as there was no air conditioning for three weeks mike and i reported to mrs martin
and worked our three hours by noon our work was over and she dropped three little dimes in
each of our hands now even at the age of 9 in the mid-1950s 30 cents was not too exciting
comic books cost 10 cents back then so i usually spent my money on comic books and went home by
wednesday of the fourth week i was ready to quit i had agreed to work only because i wanted to
learn to make money from mike's dad and now i was a slave for 10 cents an hour on top of that i
had not seen mike's dad since that first saturday i'm quitting i told mike at lunch time school was
boring and now i did not even have my saturdays to look forward to but it was the 30 cents that
really got to me this time mike smiled what are you laughing at i asked with anger and frustration
dad said this would happen he said to meet with him when you were ready to quit what i said
indignantly he's been waiting for me to get fed up sort of mike said dad's kind of different he
doesn't teach like you or dad your mom and dad lecture a lot my dad is quiet and a man of
few words you just wait till this saturday i'll tell him you're ready you mean i've been set up no
not really but maybe dad will explain on saturday waiting in line on saturday i was ready to face
mike's dad even my real dad was angry with him my real dad the one i called the poor one thought
that my rich dad was violating child labor laws and should be investigated my educated poor
dad told me to demand what i deserve at least 25 cents an hour my poor dad told me that if i
did not get a raise i was to quit immediately you don't need that damn job anyway
said my poor dad with indignation at eight o'clock saturday morning i walked through
the door of mike's house when mike's dad opened it take a seat and wait in line he said as i entered
he turned and disappeared into his little office next to a bedroom i looked around the room
and didn't see mike anywhere feeling awkward i cautiously sat down next to the same two
women who were there four weeks earlier they smiled and slid down the couch to make room
for me 45 minutes went by and i was steaming the two women had met with him and left 30
minutes earlier an older gentleman was in there for 20 minutes and was also gone the house
was empty and here i sat in a musty dark living room on a beautiful sunny hawaiian day waiting
to talk to a cheapskate who exploited children i could hear him rustling around the office
talking on the phone and ignoring me i was ready to walk out but for some reason i stayed
finally fifteen minutes later at exactly nine o'clock rich dad walked out of his office said
nothing and signaled with his hand for me to enter i understand you want to raise or you're going to
quit rich dad said as he swiveled in his office chair well you're not keeping your end of the
bargain i blurted out nearly in tears it was really frightening for me to confront a grown-up
you said that you would teach me if i worked for you well i've worked for you i've worked hard
i've given up my baseball games to work for you but you haven't kept your word and you haven't
taught me anything you are a crook like everyone in town thinks you are you're greedy you want all
the money and don't take care of your employees you made me wait and don't show me any respect
i'm only a little boy but i deserve to be treated better rich dad rocked back in his swivel
chair hands up to his chin and stared at me not bad he said in less than a month you sound
like most of my employees what i asked not understanding what he was saying i continued with
my grievance i thought you were going to keep your end of the bargain and teach me instead you want
to torture me that's cruel that's really cruel i am teaching you rich dad said quietly what
have you taught me nothing i said angrily you haven't even talked to me once since i agreed to
work for peanuts 10 cents an hour i should notify the government about you we have child labor laws
you know my dad works for the government you know wow said rich dad now you sound just like most
of the people who used to work for me people i've either fired or who have quit so what do you
have to say i demanded feeling pretty brave for a little kid you lied to me i've worked for you and
you have not kept your word you haven't taught me anything how do you know that i've not taught you
anything asked rich dad calmly well you've never talked to me i've worked for three weeks and you
have not taught me anything i said with a pout does teaching mean talking or a lecture rich dad
asked well yes i replied that's how they teach you in school he said smiling but that is not how
life teaches you and i would say that life is the best teacher of all most of the time life does
not talk to you it just sort of pushes you around each push is life saying wake up
there's something i want you to learn what is this man talking about i asked myself
silently life pushing me around was life talking to me now i knew i had to quit my job i was
talking to someone who needed to be locked up if you learn life's lessons you will do well if
not life will just continue to push you around people do two things some just let life push them
around others get angry and push back but they push back against their boss or their job or their
husband or wife they do not know it's life that's pushing i had no idea what he was talking about
life pushes all of us around some people give up and others fight a few learn the lesson and
move on they welcome life pushing them around to these few people it means they need and want to
learn something they learn and move on most quit and a few like you fight rich dad stood and shut
the creaky old wooden window that needed repair if you learn this lesson you will grow into a
wise wealthy and happy young man if you don't you will spend your life blaming a job low pay
or your boss for your problems you'll live life always hoping for that big break that
will solve all your money problems rich dad looked over at me to see if i was still
listening his eyes met mine we stared at each other communicating through our eyes finally
i looked away once i had absorbed his message i knew he was right i was blaming him
and i did ask to learn i was fighting rich dad continued or if you are the kind
of person who has no guts you just give up every time life pushes you if you're that kind of
person you'll live all your life playing it safe doing the right things saving yourself for some
event that never happens then you die a boring old man you'll have lots of friends who really like
you because you were such a nice hard-working guy but the truth is that you let life push you into
submission deep down you were terrified of taking risks you really wanted to win but the fear of
losing was greater than the excitement of winning deep inside you and only you will know you didn't
go for it you chose to play it safe our eyes met again you've been pushing me around i asked some
people might say that smiled rich dad i would say that i just gave you a taste of life what taste
of life i asked still angry but now curious and ready to learn you boys are the first people that
have ever asked me to teach them how to make money i have more than 150 employees and not one
of them has asked me what i know about money they ask me for a job and a paycheck but never to
teach them about money so most will spend the best years of their lives working for money not really
understanding what it is they're working for i sat there listening intently so when mike
told me you wanted to learn how to make money i decided to design a course that mirrored real
life i could talk until i was blue in the face but you wouldn't hear a thing so i decided to let
life push you around a bit so you could hear me that's why i only paid you 10 cents so what is the
lesson i learned from working for only 10 cents an hour i asked that you're cheap and exploit your
workers rich dad rocked back and laughed heartily finally he said you'd best change your point of
view stop blaming me and thinking i'm the problem if you think i'm the problem then you have to
change me if you realize that you're the problem then you can change yourself learn something and
grow wiser most people want everyone else in the world to change but themselves let me tell you
it's easier to change yourself than everyone else i don't understand i said don't blame me for
your problems rich dad said growing impatient but you only pay me 10 cents so what are you
learning rich dad asked smiling that you're cheap i said with a sly grin see you think i'm the
problem said rich dad but you are well keep that attitude and you'll learn nothing keep the
attitude that i'm the problem and what choices do you have well if you don't pay me more or show me
more respect and teach me i'll quit well put rich dad said and that's exactly what most people do
they quit and go looking for another job a better opportunity and higher pay actually thinking that
this will solve the problem in most cases it won't so what should i do i asked just take
this measly ten cents an hour and smile rich dad smiled that's what the other people
do but that's all they do waiting for a raise thinking that more money will solve
their problems most just accept it and some take a second job working harder
but again accepting a small paycheck i sat staring at the floor beginning to
understand the lesson rich dad was presenting i could sense it was a taste of life finally i
looked up and asked so what will solve the problem this he said leaning forward in his chair
and tapping me gently on the head this stuff between your ears it was at that moment that
richted shared the pivotal point of view that separated him from his employees and my
poor dad and led him to eventually become one of the richest men in hawaii while my highly
educated but poor dad struggled financially all his life it was a singular point of view
that made all the difference over a lifetime rich dad said this point of view over and over
which i call lesson number one the poor and the middle class work for money the rich have money
work for them on that bright saturday morning i learned a completely different point of view
from what i had been taught by my poor dad at the age of nine i understood that both
dads wanted me to learn both dads encouraged me to study but not the same things my highly
educated dad recommended that i do what he did son i want you to study hard get good grades so you
can find a safe secure job with a big company and make sure it has excellent benefits my
rich dad wanted me to learn how money works so i could make it work for me these lessons
i would learn through life with his guidance not because of a classroom my rich dad
continued my first lesson i'm glad you got angry about working for 10 cents an hour if
you hadn't got angry and had simply accepted it i would have to tell you that i could not teach
you you see true learning takes energy passion and a burning desire anger is a big part of that
formula for passion is anger and love combined when it comes to money most people want to play
it safe and feel secure so passion does not direct them fear does so is that why they'll take
jobs with low pay i asked yes said rich dad some people say i exploit people because i don't pay
as much as the sugar plantation or the government i say the people exploit themselves it's
their fear not mine but don't you feel you should pay them more i asked i don't have to and
besides more money will not solve their problems just look at your dad he makes a lot of money
and he still can't pay his bills most people given more money only get into more debt so that's
why the 10 cents an hour i said smiling it's part of the lesson that's right smiled rich dad you
see your dad went to school and got an excellent education so he could get a high paying job but he
still has money problems because he never learned anything about money in school on top of that
he believes in working for money and you don't i asked no not really said rich dad if you want
to learn to work for money then stay in school that is a great place to learn to do that but if
you want to learn how to have money work for you then i will teach you that but only if you want to
learn wouldn't everyone want to learn that i asked no said rich dad simply because it's easier to
learn to work for money especially if fear is your primary emotion when the subject of money is
discussed i don't understand i said with a frown don't worry about that for now just know that
it's fear that keeps most people working at a job the fear of not paying their bills the fear of
being fired the fear of not having enough money and the fear of starting over that's the price of
studying to learn a profession or trade and then working for money most people become a slave
to money and then get angry at their boss learning to have money work for you is a
completely different course of study i asked absolutely rich dad answered absolutely we sat in
the silence on that beautiful hawaiian saturday morning my friends had just started their little
league baseball game but for some reason i was now thankful i had decided to work for 10 cents an
hour i sensed that i was about to learn something my friends wouldn't learn in school ready to
learn asked rich dad absolutely i said with a grin i have kept my promise i've been teaching you
from afar my rich dad said at nine years old you've gotten a taste of what it feels like
to work for money just multiply your last month by 50 years and you will have an idea
of what most people spend their life doing i don't understand i said how did you feel
waiting in line to see me wants to get hired and wants to ask for more money terrible i said
if you choose to work for money that is what life will be like said rich dad and how did you feel
when mrs martin dropped three dimes in your hand for three hours of work i felt like it wasn't
enough it seemed like nothing i was disappointed i said and that is how most employees feel
when they look at their paychecks especially after all the tax and other deductions
are taken out at least you got 100 percent you mean most workers don't get paid everything i
asked with amazement heavens no said rich dad the government always takes its share first how do
they do that i asked taxes said rich dad you're taxed when you earn you're taxed when you spend
your taxed when you save your taxed when you die why do people let the government do that to them
the rich don't said rich dad with a smile the poor and the middle class do i'll bet you that i
earn more than your dad yet he pays more in taxes how can that be i asked at my age that made no
sense to me why would someone let the government do that to them rich dad rocked slowly and
silently in his chair just looking at me ready to learn he asked i nodded my head slowly
as i said there is a lot to learn learning how to have money work for you is a lifetime
study most people go to college for four years and their education ends i already know that my
study of money will continue over my lifetime simply because the more i find out
the more i find out i need to know most people never study the subject they go to
work get their paycheck balance their checkbooks and that's it then they wonder why they have money
problems they think that more money will solve the problem and don't realize that it's their
lack of financial education that is the problem so my dad has tax problems because he doesn't
understand money i asked confused look said rich dad taxes are just one small section
on learning how to have money work for you today i just wanted to find out if you
still have the passion to learn about money most people don't they want to go to school learn
a profession have fun at their work and earn lots of money one day they wake up with big money
problems and then they can't stop working that's the price of only knowing how to work for money
instead of studying how to have money work for you so do you still have the passion to learn asked
rich dad i nodded my head good said rich dad now get back to work this time i will pay you
nothing what i asked in amazement you heard me nothing you will work the same three hours every
saturday but this time you will not be paid 10 cents per hour you said you wanted to learn to
not work for money so i'm not going to pay you anything i couldn't believe what i was hearing
i've already had this conversation with mike and he's already working dusting and stacking canned
goods for free you better hurry and get back there that's not fair i shouted you've got to
pay something you said you wanted to learn if you don't learn this now you'll grow up
to be like the two women and the older man sitting in my living room working for money
and hoping i don't fire them or like your dad earning lots of money only to be in debt up to his
eyeballs hoping more money will solve the problem if that's what you want i'll go back to our
original deal of 10 cents an hour or you can do what most adults do complain that there is not
enough pay quit and go looking for another job but what do i do i asked rich dad tapped me on
the head use this he said if you use it well you will soon thank me for giving you an
opportunity and you will grow into a rich man i stood there still not believing what a raw
deal i was handed i came to ask for a raise and somehow i was instead working for nothing
rich dad tapped me on the head again and said use this now get out of here and get back to work
lesson number one the rich don't work for money i didn't tell my poor dad i wasn't being paid he
wouldn't have understood and i didn't want to try to explain something i didn't understand myself
for three more weeks mike and i worked three hours every saturday for nothing the work didn't
bother me and the routine got easier but it was the missed baseball games and not being able
to afford to buy a few comic books that got to me rich dad stopped by at noon on the third week we
heard his truck pull up in the parking lot and sputter when the engine was turned off he entered
the store and greeted mrs martin with a hug after finding out how things were going in the
store he reached into the ice cream freezer pulled out two bars paid for them and signaled
to mike and me let's go for a walk boys we crossed the street dodging a few cars and walked
across a large grassy field where a few adults were playing softball sitting down at a lone
picnic table he handed mike and me the treats how's it going boys okay mike said i nodded in
agreement learn anything yet rich dad asked mike and i looked at each other shrugged our
shoulders and shook our heads in unison avoiding one of life's biggest traps well you
boys had better start thinking you're staring at one of life's biggest lessons if you learn it
you'll enjoy a life of great freedom and security if you don't you'll wind up like mrs martin and
most of the people playing softball in this park they work very hard for little money clinging
to the illusion of job security and looking forward to a three-week vacation each year and
maybe a skimpy pension after 45 years of service if that excites you i'll give you a raise
to 25 cents an hour but these are good hard-working people are you making fun of them
i demanded a smile came over rich dad's face mrs martin is like a mother to me i would never be
that cruel i may sound unkind because i'm doing my best to point something out to the two of you i
want to expand your point of view so you can see something most people never have the benefit
of seeing because their vision is too narrow most people never see the trap they are in
mike and i sat there uncertain of his message he sounded cruel yet we could sense
he was trying to drive home a point with a smile rich dad said doesn't that 25 cents
an hour sound good doesn't it make your heart beat a little faster i shook my head no but it really
did 25 cents an hour would be big bucks to me okay i'll pay you a dollar an hour rich dad said
with a sly grin now my heart started to race my brain was screaming take it take it i
could not believe what i was hearing still i said nothing okay two dollars an hour
my little brain and heart nearly exploded after all it was 1956 and being paid two dollars
an hour would have made me the richest kid in the world i couldn't imagine earning that kind
of money i wanted to say yes i wanted the deal i could picture a new bicycle new baseball
glove and the adoration of my friends when i flashed some cash on top of that jimmy and
his rich friends could never call me poor again but somehow my mouth stayed shut the ice
cream had melted and was running down my hand rich dad was looking at two boys staring
back at him eyes wide open and brains empty he was testing us and he knew there was a part
of our emotions that wanted to take the deal he understood that every person has a weak and
needy part of their soul that can be bought and he knew that every individual also had
a part of their soul that was resilient and could never be bought it was only a question of
which one was stronger okay five dollars an hour suddenly i was silent something had changed
the offer was too big and ridiculous not many grown-ups in 1956 made more than that but quickly
my temptation disappeared and calm set in slowly i turned to my left to look at mike he looked back
at me the part of my soul that was weak and needy was silenced the part of me that had no price
took over i knew mike had gotten to that point too good said rich dad softly most people have a
price and they have a price because of human emotions named fear and greed first the fear of
being without money motivates us to work hard and then once we get that paycheck greed or desire
starts us thinking about all the wonderful things money can buy the pattern is then set what pattern
i asked the pattern of get up go to work pay bills get up go to work pay bills people's lives
are forever controlled by two emotions fear and greed offer them more money and they
continue the cycle by increasing their spending this is what i call the rat race there is
another way mike asked yes said rich dad slowly but only a few people find it and what is that way
mike asked that's what i hope you boys will learn as you work and study with me that
is why i took away all forms of pay any hints mike asked we are kind of tired
of working hard especially for nothing well the first step is telling the truth said rich
dad we haven't been lying i said i did not say you were lying i said to tell the truth rich dad
retorted the truth about what i asked how you're feeling rich dad said you don't have to say
it to anyone else just admit it to yourself you mean the people in this park the people who
work for you mrs martin they don't do that i asked i doubt it said rich dad instead they feel the
fear of not having money they don't confront it logically they react emotionally instead of
using their heads rich dad said then they get a few bucks in their hands and again the emotions
of joy desire and greed take over and again they react instead of think so their emotions control
their brain mike said that's correct said rich dad instead of admitting the truth about how they feel
they react to their feelings and fail to think they feel the fear so they go to work hoping
that money will soothe the fear but it doesn't it continues to haunt them and they return to
work hoping again that money will calm their fears and again it doesn't fear keeps them in this trap
of working earning money working earning money hoping the fear will go away but every day they
get up and that old fear wakes up with them for millions of people that old fear keeps them
awake all night causing a night of turmoil and worry so they get up and go to work hoping
that a paycheck will kill that fear gnawing at their souls money is running their lives
and they refuse to tell the truth about that money is in control of their emotions and their
souls rich dad sat quietly letting his words sink in mike and i had heard what he said but
didn't understand fully what he was talking about i just knew that i often wondered why grown-ups
hurried off to work it did not seem like much fun and they never looked that happy but something
kept them going realizing we had absorbed as much as possible of what he was talking about
rich dad said i want you boys to avoid that trap that is really what i want to teach you not
just to be rich because being rich does not solve the problem it doesn't i asked surprised no
it doesn't let me explain the other emotion desire some call it greed but i prefer desire it's
perfectly normal to desire something better prettier more fun or exciting so people
also work for money because of desire they desire money for the joy they think it
can buy but the joy that money brings is often short-lived and they soon need more money for more
joy more pleasure more comfort and more security so they keep working thinking money will soothe
their souls that are troubled by fear and desire but money can't do that even rich people do this
mike asked rich people included said rich dad in fact the reason many rich people are rich
isn't because of desire but because of fear they believe that money can eliminate the fear
of being poor so they amass tons of it only to find the fear gets worse now they fear losing the
money i have friends who keep working even though they have plenty i know people who have millions
who are more afraid now than when they were poor they're terrified of losing it all
the fears that drove them to get rich got worse that weak and needy part of
their soul is actually screaming louder they don't want to lose the big houses the
cars and the high life money has bought them they worry about what their friends
would say if they lost all their money many are emotionally desperate and neurotic
although they look rich and have more money so is a poor man happier i asked no i don't think
so replied rich dad the avoidance of money is just as psychotic as being attached to money as
if on cue the town derelict went past our table stopping by the large rubbish can and rummaging
around in it the three of us watched him with great interest when before we probably would have
just ignored him rich dad pulled a dollar out of his wallet and gestured to the older man seeing
the money the derelict came over immediately took the bill thanked rich dad profusely and
hurried off ecstatic with his good fortune he's not much different from most of my employees
said rich dad i've met so many people who say oh i'm not interested in money yet they'll work
at a job for eight hours a day that's a denial of truth if they weren't interested in money
then why are they working that kind of thinking is probably more psychotic than a person who
hoards money as i sat there listening to my rich dad my mind flashed back to the countless
times my own dad said i'm not interested in money he said those words often he also covered himself
by always saying i work because i love my job so what do we do i asked not work for money
until all traces of fear and greed are gone no that would be a waste of time said rich dad
emotions are what make us human the word emotion stands for energy in motion be truthful about your
emotions and use your mind and emotions in your favor not against yourself whoa said
mike don't worry about what i just said it will make more sense in years to come just
be an observer not a reactor to your emotions most people do not know that it's their
emotions that are doing the thinking your emotions are your emotions but you've
got to learn to do your own thinking can you give me an example i asked sure replied rich
dad when a person says i need to find a job it's most likely an emotion doing the thinking
fear of not having money generates that thought but people do need money if they have bills to pay
i said sure they do smiled rich dad all i'm saying is that it's fear that is all
too often doing the thinking i don't understand said mike for example said rich
dad if the fear of not having enough money arises instead of immediately running out to get a job
they instead might ask themselves this question will a job be the best solution to this fear
over the long run in my opinion the answer is no a job is really a short-term solution to a
long-term problem but my dad is always saying stay in school and get good grades so you can
find a safe secure job i interjected somewhat confused yes i understand he says that said
rich dad smiling most people recommend that and it's a good path for most people but people
make that recommendation primarily out of fear you mean my dad says that because he's afraid yes
said rich dad he's terrified that you won't earn enough money and won't fit into society don't get
me wrong he loves you and wants the best for you i too believe an education and a job are
important but it won't handle the fear you see that same fear that makes him get up
in the morning to earn a few bucks is the fear that is causing him to be
so fanatical about your going to school so what do you recommend i asked i want to teach
you to master the power of money instead of being afraid of it they don't teach that in school
and if you don't learn it you become a slave to money it was finally making sense he wanted us
to widen our views and to see what the mrs martins of this world couldn't see he used examples that
sounded cruel at the time but i've never forgotten them my vision widened that day and i began
to see the trap that lay ahead for most people you see we're all employees ultimately we
just work at different levels said rich dad i just want you boys to have a chance to avoid the
trap caused by those two emotions fear and desire use them in your favor not against you
that's what i want to teach you i'm not interested in just teaching you to make a pile
of money that won't handle the fear or desire if you don't first handle fear and desire and
you get rich you'll only be a highly paid slave so how do we avoid the trap i asked the main
cause of poverty or financial struggle is fear and ignorance not the economy or the government or the
rich it's self-inflicted fear and ignorance that keep people trapped so you boys go to school and
get your college degrees and i'll teach you how to stay out of the trap the pieces of the puzzle
were appearing my highly educated dad had a great education and a great career but school never
told him how to handle money or his fear of it it became clear that i could learn different and
important things from two fathers so you've been talking about the fear of not having money how
does the desire for money affect our thinking mike asked how did you feel when i tempted you with a
pay raise did you notice your desires rising we nodded our heads by not giving in to your emotions
you were able to delay your reactions and think that is important we will always have emotions of
fear and greed from here on in it's imperative for you to use those emotions to your advantage and
for the long term to not let your emotions control your thinking most people use fear and greed
against themselves that's the start of ignorance most people live their lives chasing paychecks pay
raises and job security because of the emotions of desire and fear not really questioning where those
emotion driven thoughts are leading them it's just like the picture of a donkey dragging a cart with
its owner dangling a carrot just in front of its nose the donkey's owner may be going where he
wants to but the donkey is chasing an illusion tomorrow there will only be another carrot for
the donkey you mean the moment i pictured a new baseball glove candy and toys that's like a
carrot to a donkey mike asked yes and as you get older your toys get more expensive a new car
a boat and a big house to impress your friends said rich dad with a smile fear pushes you out
the door and desire calls to you that's the trap so what's the answer mike asked what intensifies
fear and desire is ignorance that is why rich people with lots of money often have more fear the
richer they get money is the carrot the illusion if the donkey could see the whole picture it
might rethink its choice to chase the carrot rich dad went on to explain that a human's life is
a struggle between ignorance and illumination he explained that once a person stops searching for
information and self-knowledge ignorance sets in that struggle is a moment-to-moment
decision to learn to open or close one's mind look school is very important you go
to school to learn a skill or profession to become a contributing member of society every culture
needs teachers doctors mechanics artists cooks business people police officers
firefighters and soldiers schools train them so society can thrive and flourish said rich dad
unfortunately for many people school is the end not the beginning there was a long silence
rich dad was smiling i didn't comprehend everything he said that day but as with most great
teachers his words continued to teach for years i've been a little cruel today said rich dad
but i want you to always remember this talk i want you to always think of mrs martin and i
want you always to remember that donkey never forget that fear and desire can lead you into
life's biggest trap if you're not aware of them controlling your thinking to spend your life
living in fear never exploring your dreams is cruel to work hard for money thinking that it
will buy you things that will make you happy is also cruel to wake up in the middle of the
night terrified about paying bills is a horrible way to live to live a life dictated by the size
of a paycheck is not really living a life thinking that a job makes you secure is lying to yourself
that's cruel and that's the trap i want you to avoid i've seen how money runs people's lives
don't let that happen to you please don't let money run your life a softball rolled under our
table rich dad picked it up and threw it back so what does ignorance have to do with greed
and fear i asked because it is ignorance about money that causes so much greed and fear
said rich dad let me give you some examples a doctor wanting more money to better provide for
his family raises his fees by raising his fees it makes health care more expensive for everyone it
hurts the poor people the most so they have worse health than those with money because the doctors
raise their fees the attorneys raise their fees because the attorney's fees have gone up school
teachers want a raise which raises our taxes and on and on and on soon there will be such
a horrifying gap between the rich and the poor that chaos will break out and another great
civilization will collapse history proves the great civilizations collapse when the gap
between the haves and have-nots is too great sadly america is on that same course because we
haven't learned from history we only memorize historical dates and names not the lesson
aren't prices supposed to go up i asked in an educated society with a well-run government
prices should actually come down of course that is often only true in theory prices go up
because of greed and fear caused by ignorance if schools taught people about money there would
be more money and lower prices but schools focus only on teaching people to work for money not
how to harness money's power but don't we have business schools mike asked and haven't you
encouraged me to go for my mba yes said rich dad but all too often business schools train
employees to become sophisticated bean counters heaven forbid a bean counter takes over
a business all they do is look at the numbers fire people and kill the business
i know this because i hire bean counters all they think about is cutting costs and raising
prices which cause more problems bean counting is important i wish more people knew it but it too
is not the whole picture added rich debt angrily so is there an answer asked mike yes said
rich dad learn to use your emotions to think not think with your emotions when you boys
mastered your emotions by agreeing to work for free i knew there was hope when you again resisted
your emotions when i tempted you with more money you were again learning to think in spite of
being emotionally charged that's the first step why is that step so important i asked well
that's up to you to find out if you want to learn i'll take you boys into the briar patch
a place almost everyone else avoids if you go with me you'll let go of the idea of working for
money and instead learn to have money work for you and what will we get if we go with you what if
we agree to learn from you what will we get i asked the same thing brayer rabbit got said rich
dad referring to the classic children's story is there a briar patch i asked yes said rich
dad the briar patch is our fear and greed confronting fear weaknesses and neediness
by choosing our own thoughts is the way out choosing our thoughts mike asked puzzled yes
choosing what we think rather than reacting to our emotions instead of just getting up and
going to work because not having the money to pay your bills is scaring you ask yourself is working
harder at this the best solution to this problem most people are too afraid to rationally think
things through and instead run out the door to a job they hate the tar baby is in control that's
what i mean by choosing your thoughts and how do we do that mike asked that's what i will teach you
i'll teach you to have a choice of thoughts rather than a knee-jerk reaction like gulping down
your morning coffee and running out the door remember what i said before a job is only a
short-term solution to a long-term problem most people have only one problem in mind and it's
short-term it's the bills at the end of the month the tar baby money controls their lives or should
i say the fear and ignorance about money controls it so they do as their parents did they get
up every day and go work for money not taking the time to ask the question is there another
way their emotions now control their thinking not their heads can you tell the difference
between emotions thinking and the head thinking mike asked oh yes i hear it all the time said rich
dad i hear things like well everyone has to work or the rich are crooks or i'll get another job
i deserve this raise you can't push me around or i like this job because it's secure no one
asks is there something i'm missing here which would break through the emotional
thought and give you time to think clearly as we headed back to the store rich dad
explained that the rich really did make money they did not work for it he went on to explain
that when mike and i were casting five cent pieces out of lead thinking we were making money
we were very close to thinking the way the rich think the problem was that creating money
is legal for the government and banks to do but illegal for us to do there are legal
ways to create money from nothing he told us rich dad went on to explain that the
rich know that money is an illusion truly like the carrot for the donkey it's only
out of fear and greed that the illusion of money is held together by billions of people who
believe that money is real it's not money is really made up it is only because of the illusion
of confidence and the ignorance of the masses that this house of cards stands he talked about the
gold standard that america was on and that each dollar bill was actually a silver certificate
what concerned him was the rumor that we would someday go off the gold standard and our dollars
would no longer be backed by something tangible if that happens boys all hell will break loose
the poor the middle class and the ignorant will have their lives ruined simply because they
will continue to believe that money is real and that the company they work for or the
government will look after them we really did not understand what he was saying that day
but over the years it made more and more sense seeing what others miss as he climbed into
his pickup truck outside his convenience store rich dad said keep working boys but the sooner
you forget about needing a paycheck the easier your adult life will be keep using your brain work
for free and soon your mind will show you ways of making money far beyond what i could ever pay you
you will see things that other people never see most people never see these opportunities because
they're looking for money and security so that's all they get the moment you see one opportunity
you'll see them for the rest of your life the moment you do that i'll teach you something
else learn this and you'll avoid one of life's biggest traps mike and i picked up our things
from the store and waved goodbye to mrs martin we went back to the park to the same picnic bench
and spent several more hours thinking and talking we spent the next week at school thinking and
talking too for two more weeks we kept thinking talking and working for free at the end of the
second saturday i was again saying goodbye to mrs martin and looking at the comic book stand
with a longing gaze the hard thing about not even getting 30 cents every saturday was that i
didn't have any money to buy comic books suddenly as mrs martin said goodbye to mike and me i saw
her do something i'd never seen her do before mrs martin was cutting the front page of
the comic book in half she kept the top half of the comic book cover and threw the
rest of the book into a large cardboard box when i asked her what she did
with the comic books she said i throw them away i give the top half of the cover
back to the comic book distributor for credit when he brings in the new comics he's coming
in an hour mike and i waited for an hour soon the distributor arrived and i asked him if we
could have the comic books to my delight he said you can have them if you work for this store
and do not resell them remember our old business partnership well mike and i revived it using a
spare room in mike's basement we began piling hundreds of comic books in that room soon our
comic book library was open to the public we hired mike's younger sister who loved to study to
be head librarian she charged each child 10 cents admission to the library which was open from 2 30
pm to 4 30 pm every day after school the customers the children of the neighborhood could read as
many comics as they wanted in two hours it was a bargain for them since a comic cost ten cents
each and they could read five or six in two hours mike's sister would check the kids as they left to
make sure they weren't borrowing any comic books she also kept the books logging in how many kids
showed up each day who they were and any comments they might have mike and i averaged nine dollars
and fifty cents per week over a three month period we paid his sister one dollar a week and allowed
her to read the comics for free which she rarely did since she was always studying mike and
i kept our agreement by working in the store every saturday and collecting all the comic books
from the different stores we kept our agreement to the distributor by not selling any comic
books we burned them once they got too tattered we tried opening a branch office but we
could never quite find someone as trustworthy and dedicated as mike's sister at an early age
we found out how hard it was to find good staff three months after the library first opened
a fight broke out in the room some bullies from another neighborhood pushed their way in and
mike's dad suggested we shut down the business so our comic book business shut down and we stopped
working on saturdays at the convenience store but rich dad was excited because he had
new things he wanted to teach us he was happy because we had learned our first lesson
so well we learned to make money work for us by not getting paid for our work at the store we
were forced to use our imaginations to identify an opportunity to make money by starting
our own business the comic book library we were in control of our own finances not
dependent on an employer the best part was that our business generated money for
us even when we weren't physically there our money worked for us instead of paying
us money rich dad had given us so much more chapter two lesson two why teach financial
literacy it's not how much money you make it's how much money you keep in 1990 mike took over his father's empire and
is in fact doing a better job than his dad did we see each other once or twice a year on the golf
course he and his wife are wealthier than you can imagine rich dad's empire is in great hands and
mike is now grooming his son to take his place as his dad had groomed us in 1994 i retired
at the age of 47 and my wife kim was 37. retirement does not mean not working for us it
means that barring unforeseen cataclysmic changes we can work or not work and our wealth grows
automatically staying ahead of inflation our assets are large enough to grow by
themselves it's like planting a tree you water it for years and then one day it
doesn't need you anymore its roots are implanted deep enough then the tree provides shade for your
enjoyment mike chose to run the empire and i chose to retire whenever i speak to groups of people
they often ask what i would recommend that they do how do i get started is there a book you would
recommend what should i do to prepare my children what is your secret to success how do i make
millions whenever i hear one of these questions i'm reminded of the following
story the richest businessman in 1923 a group of our greatest leaders
and richest businessmen held a meeting at the edgewater beach hotel in chicago among
them were charles schwab head of the largest independent steel company samuel insult
president of the world's largest utility howard hopson head of the largest gas company ivar
kruger president of international match company one of the world's largest companies at that
time leon frazier president of the bank of international settlements richard whitney
president of the new york stock exchange arthur cotton and jesse livermore
two of the biggest stock speculators and albert fall a member of president harding's
cabinet 25 years later nine of these titans ended their lives as follows schwab died
penniless after living for five years on borrowed money insult died broke in a foreign land
and kruger and cotton also died broke hopson went insane whitney and albert fall were released from
prison and frazier and livermore committed suicide i doubt if anyone can say what really happened
to these men if you look at the date 1923 it was just before the 1929 market crash and the great
depression which i suspect had a great impact on these men and their lives the point is this today
we live in times of greater and faster change than these men did i suspect there will be many booms
and busts in the coming years that will parallel the ups and downs these men faced i am concerned
that too many people are too focused on money and not on their greatest wealth their education
if people are prepared to be flexible keep an open mind and learn they will grow richer and
richer despite tough changes if they think money will solve problems they will have a rough ride
intelligence solves problems and produces money money without financial intelligence is money
soon gone most people fail to realize that in life it's not how much money you make it's how
much money you keep we've all heard stories of lottery winners who are poor then suddenly
rich and then poor again they win millions yet are soon back where they started or stories
of professional athletes who at the age of 24 are earning millions but are sleeping under
a bridge 10 years later i remember a story of a young basketball player who a year ago had
millions today at just 29 he claims his friends attorney and accountant took his money and he
was forced to work at a car wash for minimum wage he was fired from the car wash because he refused
to take off his championship ring as he was wiping off the cars his story made national news and he
is appealing his termination claiming hardship and discrimination he claims that the ring is all he
has left and if it was stripped away he'll crumble i know so many people who became instant
millionaires and while i am glad some people have become richer and richer i caution them that
in the long run it's not how much money you make it's how much you keep and how many generations
you keep it so when people ask where do i get started or tell me how to get rich quick they
often are greatly disappointed with my answer i simply say to them what my rich dad
said to me when i was a little kid if you want to be rich you need to be financially
literate that idea was drummed into my head every time we were together as i said my educated dad
stressed the importance of reading books while my rich dad stressed the need to master financial
literacy if you are going to build the empire state building the first thing you need to do is
dig a deep hole and pour a strong foundation if you are going to build a home in the suburbs all
you need to do is pour a six inch slab of concrete most people in their drive to get rich are trying
to build an empire state building on a six-inch slab our school system created in the agrarian
age still believes in homes with no foundation dirt floors are still the rage so kids graduate
from school with virtually no financial foundation one day sleepless and deep in debt in
suburbia living the american dream they decide that the answer to their financial
problems is to find a way to get rich quick construction on the skyscraper begins it goes
up quickly and soon instead of the empire state building we have the leaning tower of suburbia
the sleepless nights return as for mike and me in our adult years both of our choices were
possible because we were taught to pour a strong financial foundation when we were just kids
accounting is possibly the most confusing boring subject in the world but if you want to be rich
long-term it could be the most important subject for rich dad the question was how to take a boring
and confusing subject and teach it to kids the answer he found was to make it simple by teaching
it in pictures my rich dad poured a strong financial foundation for mike and me since we
were just kids he created a simple way to teach us for years he only drew pictures and used few
words mike and i understood the simple drawings the jargon the movement of money and then
in later years rich dad began adding numbers today mike has gone on to master much more
complex and sophisticated accounting analysis because he had to in order to run his empire i am
not as sophisticated because my empire is smaller yet we come from the same simple foundation
over the following pages we will discuss those same simple line drawings mike's dad
created for us though basic those drawings helped guide two little boys in building great
sums of wealth on a solid and deep foundation rule number one you must know the difference
between an asset and a liability and buy assets if you want to be rich this is all you need to
know it is rule number one it is the only rule this may sound absurdly simple but most
people have no idea how profound this rule is most people struggle financially because they do
not know the difference between an asset and a liability rich people acquire assets the poor and
middle class acquire liabilities that they think are assets said rich dad when rich dad explained
this to mike and me we thought he was kidding here we were nearly teenagers and waiting for the
secret to getting rich and this was his answer it was so simple that we stopped for a long time
to think about it what is an asset asked mike don't worry right now said rich dad just let the
idea sink in if you can comprehend the simplicity your life will have a plan and be financially
easy it is simple that is why the idea is missed you mean all we need to know is what an asset
is acquire them and we'll be rich i asked rich dad nodded his head it's that simple if it's
that simple how come everyone is not rich i asked rich dad smiled because people do not know the
difference between an asset and a liability i remember asking how could adults be so misguided
if it is that simple if it is that important why would everyone not want to find out it
took rich dad only a few minutes to explain what assets and liabilities were as an adult i
have difficulty explaining it to other adults the simplicity of the idea escapes them
because they have been educated differently they were taught by other educated
professionals such as bankers accountants real estate agents financial planners
and so forth the difficulty comes in asking adults to unlearn or become children again an intelligent
adult often feels it is demeaning to pay attention to simplistic definitions rich dad believed
in the kiss principle keep it simple stupid or keep it super simple so he kept it simple for
us and that made our financial foundation strong so what causes the confusion how could something
so simple be so screwed up why would someone buy an asset that was really a liability the answer
is found in basic education we focus on the word literacy and not financial literacy what defines
something to be an asset or a liability are not words in fact if you really want to be confused
look up the words asset and liability in the dictionary i know the definition may sound good
to a trained accountant but for the average person it makes no sense but we adults are often too
proud to admit that something does not make sense to us young boys rich dad said what defines
an asset are not words but numbers and if you can't read the numbers you can't tell an asset
from a hole in the ground in accounting rich dad would say it's not the numbers but what the
numbers are telling you it's just like words it's not the words but the story the words are
telling you if you want to be rich you've got to read and understand numbers if i heard that
once i heard it a thousand times from my rich dad and i also heard the rich acquire assets and
the poor and middle class acquire liabilities here is how to tell the difference between
an asset and a liability most accountants and financial professionals do not agree with
the definitions but these simple drawings were the start of strong financial foundations for two
young boys an asset is something that puts money in my pocket a liability is something that takes
money out of my pocket this is really all you need to know if you want to be rich simply spend
your life buying assets if you want to be poor or middle class spend your life buying liabilities
illiteracy both in words and numbers is the foundation of financial struggle if people are
having difficulties financially there is something that they don't understand either in words
or numbers the rich are rich because they are more literate in different areas than people
who struggle financially so if you want to be rich and maintain your wealth it's important to be
financially literate in words as well as numbers numbers alone mean little just as words out of
context mean little it's the story that counts in financial reporting reading numbers is looking for
the plot the story of where the cash is flowing in eighty percent of most families the financial
story paints a picture of hard work to get ahead however this effort is for not because they spend
their lives buying liabilities instead of assets everyone has living expenses the need for food
shelter and clothing it is the cash flow that tells the story of how a person handles their
money the reason i started with the story of the richest men in america is to illustrate the flaw
in believing that money will solve all problems that is why i cringe whenever i hear
people ask me how to get rich quicker or where they should start i often hear
i'm in debt so i need to make more money but more money will often not solve the problem in
fact it may compound the problem money often makes obvious our tragic human flaws putting a spotlight
on what we don't know that is why all too often a person who comes into a sudden windfall of cash
let's say an inheritance a pay raise or lottery winnings soon returns to the same financial mess
if not worse than the mess they were in before money only accentuates the cash
flow pattern running in your head if your pattern is to spend everything
you get most likely an increase in cash will just result in an increase in spending thus
the saying a fool and his money is one big party i have said many times that we go to school to
gain scholastic and professional skills both of which are important we learn to make money with
our professional skills in the 1960s when i was in high school if someone did well academically
people assumed this bright student would go on to be a medical doctor because it was the profession
with the promise of the greatest financial reward today doctors face financial challenges i wouldn't
wish on my worst enemy insurance companies taking control of the business managed health care
government intervention and malpractice suits today kids want to be famous athletes movie stars
rock stars beauty queens or ceos because that is where the fame money and prestige are that is
the reason it is so hard to motivate kids in school today they know that professional success
is no longer solely linked to academic success as it once was because students leave school
without financial skills millions of educated people pursue their profession successfully but
later find themselves struggling financially they work harder but don't get ahead what
is missing from their education is not how to make money but how to manage
money it's called financial aptitude what you do with the money once you make it
how to keep people from taking it from you how to keep it longer and how to make that money
work hard for you most people don't understand why they struggle financially because they don't
understand cash flow a person can be highly educated professionally successful and financially
illiterate these people often work harder than they need to because they learned how to work hard
but not how to have their money work hard for them the story of how the quest for a financial
dream turns into a financial nightmare the classic story of hard-working people has set a
pattern recently married the happy highly educated young couple moves into one of their cramped
rented apartments immediately they realize that they are saving money because two can live
as cheaply as one the problem is the apartment is cramped they decide to save money to buy
their dream home so they can have kids they now have two incomes and they begin to focus on
their careers their incomes begin to increase as their incomes go up their expenses go up as well
the number one expense for most people is taxes many people think it's income tax but for most
americans their highest tax is social security as an employee it appears as if the social
security tax combined with the medicare tax rate is roughly 7.5 percent but it's really 15 since
the employer must match the social security amount in essence it is money the employer can't pay you
on top of that you still have to pay income tax on the amount deducted from your wages for social
security tax income you never received because it went directly to social security through
withholding going back to the young couple as a result of their incomes increasing they decide to
buy the house of their dreams once in their house they have a new tax called property tax then they
buy a new car new furniture and new appliances to match their new house all of a sudden they wake up
and their liabilities column is full of mortgage and credit card debt their liabilities go up
they're now trapped in the rat race pretty soon a baby comes along and they work harder the process
repeats itself higher incomes cause higher taxes also called bracket creep a credit card comes in
the mail they use it it maxes out a loan company calls and says their greatest asset their home
has appreciated in value because their credit is so good the company offers a bill consolidation
loan and tells them the intelligent thing to do is clear off the high interest consumer debt by
paying off their credit card and besides interest on their home is a tax deduction they go for
it and pay off those high interest credit cards they breathe a sigh of relief their credit cards
are paid off they've now folded their consumer debt into their home mortgage their payments go
down because they extend their debt over 30 years it is the smart thing to do their neighbor calls
to invite them to go shopping the memorial day sale is on they promise themselves they'll
just window shop but they take a credit card just in case i run into this young couple
all the time their names change but their financial dilemma is the same they come to
one of my talks to hear what i have to say they ask me can you tell us how to make more money
they don't understand that their trouble is really how they choose to spend the money they do
have it is caused by financial illiteracy and not understanding the difference between an
asset and a liability more money seldom solves someone's money problems intelligence solves
problems there is a saying a friend of mine says over and over to people in debt if you find
you have dug yourself into a hole stop digging as a child my dad often told us that the japanese
were aware of three powers the power of the sword the jewel and the mirror the sword symbolizes the
power of weapons america has spent trillions of dollars on weapons and because of this is
a powerful military presence in the world the jewel symbolizes the power of money there is
some degree of truth to the saying remember the golden rule he who has the gold makes the rules
the mirror symbolizes the power of self-knowledge this self-knowledge according to japanese
legend was the most treasured of the three all too often the poor and middle class allow the
power of money to control them by simply getting up and working harder failing to ask themselves if
what they do makes sense they shoot themselves in the foot as they leave for work every morning by
not fully understanding money the vast majority of people allow its awesome power to control them
if they used the power of the mirror they would have asked themselves does this make sense all
too often instead of trusting their inner wisdom that genius inside most people follow the crowd
they do things because everybody else does them they conform rather than question often they
mindlessly repeat what they have been told diversify your home is an asset your home is
your biggest investment you get a tax break for going into greater debt get a safe
job don't make mistakes don't take risks it is said that the fear of public speaking
is a fear greater than death for most people according to psychiatrists the fear of public
speaking is caused by the fear of ostracism the fear of standing out the fear of criticism the
fear of ridicule and the fear of being an outcast the fear of being different prevents most people
from seeking new ways to solve their problems that is why my educated dad said the japanese
valued the power of the mirror the most for it is only when we look into it that we find
truth fear is the main reason that people say play it safe that goes for anything be it
sports relationships careers or money it is that same fear the fear of ostracism that
causes people to conform to and not question commonly accepted opinions or popular trends your
home is an asset get a bill consolidation loan and get out of debt work harder it's a promotion
someday i'll be a vice president save money when i get a raise i'll buy us a bigger house
mutual funds are safe many financial problems are caused by trying to keep up with the joneses
occasionally we all need to look in the mirror and be true to our inner wisdom rather than our
fears by the time mike and i were 16 years old we began to have problems in school we were not
bad kids we just began to separate from the crowd we worked for mike's dad after school and
on weekends mike and i often spent hours after work just sitting at a table with his
dad while he held meetings with his bankers attorneys accountants brokers investors managers
and employees here was a man who had left school at 13 who was now directing instructing
ordering and asking questions of educated people they came at his back and call and
cringed when he didn't approve of them here was a man who had not gone along with the
crowd he was a man who did his own thinking and detested the words we have to do it this way
because that's the way everyone else does it he also hated the word can't if you wanted him to
do something just say i don't think you can do it mike and i learned more sitting in on his meetings
than we did in all our years of school college included mike's dad was not book smart but he was
financially educated and successful as a result he told us over and over again an intelligent person
hires people who are more intelligent than he is so mike and i had the benefit of spending hours
listening to and learning from intelligent people but because of this mike and i couldn't go along
with the standard dogma our teachers preached and that caused problems whenever the teacher
said if you don't get good grades you won't do well in the real world mike and i just raised
our eyebrows when we were told to follow set procedures and not deviate from the rules we
could see how school discouraged creativity we started to understand why our rich dad told
us that schools were designed to produce good employees instead of employers occasionally mike
or i would ask our teachers how what we studied was applicable to the real world or why
we never studied money and how it worked to the latter question we often got
the answer that money was not important that if we excelled in our education the
money would follow the more we knew about the power of money the more distant we
grew from the teachers and our classmates my highly educated dad never pressured me about
my grades but we did begin to argue about money by the time i was 16 i probably had a far
better foundation with money than both my parents i could keep books i listened to
tax accountants corporate attorneys bankers real estate brokers investors and so forth
by contrast my dad talked to other teachers one day my dad told me that our home was
his greatest investment a not too pleasant argument took place when i showed him why
i thought a house was not a good investment i showed him the ancillary expenses
that went along with owning the home a bigger home meant bigger expenses and
the cash flow kept going out through the expense column today people still challenge
me on the idea of a house not being an asset i know that for many people it is their dream as
well as their largest investment and owning your own home is better than nothing i simply offer an
alternative way of looking at this popular dogma if my wife and i were to buy a bigger flashier
house we realize it wouldn't be an asset it would be a liability since it would take money
out of our pocket so here is the argument i put forth i really don't expect most people
to agree with it because your home is an emotional thing and when it comes to money high
emotions tend to lower financial intelligence i know from personal experience that money has
a way of making every decision emotional one when it comes to houses most people work all their
lives paying for a home they never own in other words most people buy a new house every few years
each time incurring a new 30-year loan to pay off the previous one two even though people receive
a tax deduction for interest on mortgage payments they pay for all their other expenses with after
tax dollars even after they pay off their mortgage three my wife's parents were shocked when the
property taxes on their home increased to one thousand dollars a month this was after they
had retired so the increase put a strain on their retirement budget and they felt forced to
move four houses do not always go up in value i have friends who owe a million dollars for
a home that today would sell for far less five the greatest losses of all are those from
missed opportunities if all your money is tied up in your house you may be forced to work harder
because your money continues blowing out of the expense column instead of adding to the asset
column the classic middle class cash flow pattern if a young couple would put more money into their
asset column early on their later years would be easier their assets would have grown and would be
available to help cover expenses all too often a house only serves as a vehicle for incurring a
home equity loan to pay for mounting expenses in summary the end result in making a decision
to own a house that is too expensive in lieu of starting an investment portfolio impacts an
individual in at least the following three ways one loss of time during which other assets could
have grown in value two loss of additional capital which could have been invested instead of paying
for high maintenance expenses related directly to the home three loss of education too often people
count their house and savings and retirement plans as all they have in their asset column
because they have no money to invest they simply don't invest this costs them
investment experience most never become what the investment world calls a sophisticated investor
and the best investments are usually first sold to sophisticated investors who then turn around
and sell them to the people playing it safe i am not saying don't buy a house what i'm
saying is that you should understand the difference between an asset and a liability when
i want a bigger house i first buy assets that will generate the cash flow to pay for the house my
educated dad's personal financial statement best demonstrates the life of someone caught in the rat
race his expenses match his income never allowing him enough left over to invest in assets as a
result his liabilities are larger than his assets why the rich get richer a review of
my rich dad's financial statement shows why the rich get richer the asset column
generates more than enough income to cover expenses with the balance reinvested into the
asset column the asset column continues to grow and therefore the income it produces grows
with it the result is that the rich get richer why the middle class struggle the middle class
finds itself in a constant state of financial struggle their primary income is through their
salary as their wages increase so do their taxes their expenses tend to increase in proportion to
their salary increase hence the phrase the rat race they treat their home as their primary asset
instead of investing in income producing assets this pattern of treating your home as an
investment and the philosophy that a pay raise means you can buy a larger home or spend more
is the foundation of today's debt-ridden society increased spending throws families into greater
debt and into more financial uncertainty even though they may be advancing in their jobs
and receiving raises on a regular basis this is high risk living caused
by weak financial education the massive loss of jobs in recent times proves
how shaky the middle class really is financially company pension plans are being replaced by
401k plans social security is obviously in trouble and can't be relied upon as a source for
retirement panic has set in for the middle class today mutual funds are popular because
they supposedly represent safety average mutual fund buyers are too busy
working to pay taxes and mortgages save for their children's college and pay off credit
cards they do not have time to study investing so they rely on the expertise of the manager of a
mutual fund also because the mutual fund includes many different types of investments they feel
their money is safer because it is diversified this educated middle class subscribes to the
dogma put out by mutual fund brokers and financial planners play it safe avoid risk the real tragedy
is that the lack of early financial education is what creates the risk faced by average middle
class people the reason they have to play it safe is because their financial positions are tenuous
at best their balance sheets are not balanced instead they are loaded with liabilities
and have no real assets to generate income typically their only source of income is their
paycheck their livelihood becomes entirely dependent on their employer so when genuine deals
of a lifetime come along these people can't take advantage of them because they're working so hard
are taxed to the max and are loaded with debt as i said at the start of this section the most
important rule is to know the difference between an asset and a liability once you understand the
difference concentrate your efforts on buying income generating assets that's the best way
to get started on a path to becoming rich keep doing that and your asset column will
grow keep liabilities and expenses down so more money is available to continue
pouring into the asset column soon the asset base will be so deep that you can
afford to look at more speculative investments investments that may have returns of one
hundred percent to infinity five thousand dollar investments that are soon turned into
one million dollars or more investments that the middle class calls too risky the investment
is not risky for the financially literate as an employee who is also a homeowner your
working efforts are generally as follows one you work for the company employees make their business
owner or the shareholders rich not themselves your efforts and success will help provide
for the owners success and retirement two you work for the government the government takes
its share from your paycheck before you even see it by working harder you simply increase
the amount of taxes taken by the government most people work from january to may
just for the government three you work for the bank after taxes your next largest expense
is usually your mortgage and credit card debt the problem with simply working harder is that
each of these three levels takes a greater share of your increased efforts you need to learn how
to have your increased efforts benefit you and your family directly once you have decided
to concentrate on minding your own business focusing your efforts on acquiring assets instead
of a bigger paycheck how do you set your goals most people must keep their job and rely on
their wages to fund their acquisition of assets as their assets grow how do they
measure the extent of their success when does someone know that they are rich
that they have wealth as well as having my own definitions for assets and liabilities
i also have my own definition for wealth actually i borrowed it from a man named r
buckminster fuller some call him a quack and others call him a genius years ago he got
architects buzzing because he applied for a patent for something he called a geodesic dome but in
the application fuller also said something about wealth it was pretty confusing at first but
after reading it it began to make some sense wealth is a person's ability to survive so many
number of days forward or if i stopped working today how long could i survive unlike net worth
the difference between your assets and liabilities which is often filled with a person's expense
of junk and opinions of what things are worth this definition creates the possibility for
developing a truly accurate measurement i could now measure and know where i was in terms of my
goal to become financially independent although net worth often includes non-cash producing assets
like stuff you bought that now sits in your garage wealth measures how much money your money is
making and therefore your financial survivability wealth is the measure of the cash flow from
the asset column compared with the expense column let's use an example let's say i have
cash flow from my asset column of one thousand dollars a month and i have monthly expenses of
two thousand dollars a month what is my wealth let's go back to buckminster fuller's definition
using his definition how many days forward can i survive assuming a 30-day month i have enough cash
flow for half a month when i achieve two thousand dollars a month cash flow from my assets then i
will be wealthy so while i'm not yet rich i am wealthy i now have income generated from assets
each month that fully cover my monthly expenses if i want to increase my expenses i first must
increase my cash flow to maintain this level of wealth also note that it is at this point that
i'm no longer dependent on my wages i have focused on and been successful in building an asset
column that has made me financially independent if i quit my job today i would be able to cover my
monthly expenses with the cash flow from my assets my next goal would be to have the excess cash flow
from my assets reinvested into the asset column the more money that goes into my asset column the
more my asset column grows the more my assets grow the more my cash flow grows and as long as
i keep my expenses less than the cash flow from these assets i grow richer with more and more
income from sources other than my physical labor as this reinvestment process continues i am
well on my way to becoming rich just remember this simple observation the rich buy assets
the poor only have expenses the middle class by liabilities they think are assets so how do i
start minding my own business what is the answer listen to the founder of mcdonald's in the next
chapter chapter 3 lesson 3 mind your own business the rich focus on their asset columns while
everyone else focuses on their income statements in 1974 ray kroc the founder of mcdonald's
was asked to speak to the mba class at the university of texas at austin a friend
of mine was a student in that mba class after a powerful and inspiring talk the
class adjourned and the students asked ray if he would join them at their
favorite hangout to have a few beers ray graciously accepted what business am i in rey
asked once the group had all their beers in hand everyone laughed my friend said most of the mba
students thought rey was just fooling around no one answered so rey asked again what business
do you think i'm in the students laughed again and finally one brave soul yelled out ray who in the
world doesn't know that you're in the hamburger business ray chuckled that's what i thought you
would say he paused and then quickly added ladies and gentlemen i'm not in the hamburger business
my business is real estate as my friend tells the story ray spent a good amount of time explaining
his viewpoint in his business plan ray knew that the primary business focus was to sell hamburger
franchises but what he never lost sight of was the location of each franchise he knew that the land
and its location were the most significant factors in the success of each franchise basically
the person who bought the franchise was also buying the real estate under the franchise for
ray crock's organization today mcdonald's is the largest single owner of real estate in the
world owning even more than the catholic church mcdonald's owns some of the most valuable
intersections and street corners in america and around the globe my friend considers this
as one of the most important lessons in his life today he owns car washes but his business
is the real estate under those car washes the previous chapter presented that most
people work for everyone but themselves they work first for the owners of the company
then for the government through taxes and finally for the bank that owns their mortgage when i was a
young boy we did not have a mcdonald's nearby yet my rich dad was responsible for teaching mike and
me the same lesson that ray kroc talked about at the university of texas it is secret number three
of the rich the secret is mind your own business financial struggle is often directly the result
of people working all their lives for someone else many people will simply have nothing at the end
of their working days to show for their efforts our current educational system focuses on
preparing today's youth to get good jobs by developing scholastic skills their lives will
revolve around their wages or as described earlier their income column many will study further to
become engineers scientists cooks police officers artists writers and so on these professional
skills allow them to enter the workforce and work for money but there is a big difference
between your profession and your business often i ask people what is your business
and they will say oh i'm a banker then i ask them if they own the bank and they
usually respond no i work there in that instance they have confused their profession with their
business their profession may be a banker but they still need their own business a problem with
school is that you often become what you study so if you study cooking you become a chef
if you study the law you become an attorney and a study of auto mechanics makes you a mechanic
the mistake in becoming what you study is that too many people forget to mind their own business they
spend their lives minding someone else's business and making that person rich to become financially
secure a person needs to mind their own business your business revolves around your asset
column not your income column as stated earlier the number one rule is to know the difference
between an asset and a liability and to buy assets the rich focus on their asset columns while
everyone else focuses on their income statements that is why we hear so often i need a raise if
only i had a promotion i am going back to school to get more training so i can get a better job i
am going to work overtime maybe i can get a second job in some circles these are sensible ideas
but you are still not minding your own business these ideas all still focus on the income
column and will only help a person become more financially secure if the additional money
is used to purchase income generating assets the primary reason the majority of the poor
and middle class are fiscally conservative which means i can't afford to take risks
is that they have no financial foundation they have to cling to their jobs and play it
safe when downsizing became the in thing to do millions of workers found out their largest
so-called asset their home was eating them alive their asset was costing them money every month
their car another asset was eating them alive the golf clubs in the garage that cost
one thousand dollars were not worth one thousand dollars anymore without job
security they had nothing to fall back on what they thought were assets could not help
them survive in a time of financial crisis i assume most of us have filled out a
credit application to buy a house or a car it's always interesting to
look at the net worth section because of what accepted banking and accounting
practices allow a person to count as assets one day when i wanted a loan my financial position
did not look too good so i added my new golf clubs my art collection books electronics armani suits
wrist watches shoes and other personal effects to boost the number in the asset column but i was
turned down because i had too much investment real estate the loan committee didn't like that
i made so much money from rent they wanted to know why i did not have a normal job with a
salary they did not question the armani suits golf clubs or art collection life is sometimes
tough when you do not fit the standard profile i cringe every time i hear someone say to
me that their net worth is a million dollars or one hundred thousand dollars or whatever one
of the main reasons net worth is not accurate is simply because the moment you begin selling
your assets you are taxed for any gains so many people have put themselves in deep financial
trouble when they run short of income to raise cash they sell their assets but their personal
assets can generally be sold for only a fraction of the value that is listed on their personal
balance sheet or if there is a gain on the sale of the assets they are taxed on the gain so again
the government takes its share thus reducing the amount available to help them out of debt that is
why i say someone's net worth is often worth less than they think start minding your own business
keep your daytime job but start buying real assets not liabilities or personal effects that
have no real value once you get them home a new car loses nearly 25 percent of the
price you pay for it the moment you drive it off the lot it is not a true asset even if
your banker lets you list it as one my four hundred dollar new titanium driver was worth
a hundred fifty dollars the moment i teed off keep expenses low reduce liabilities and
diligently build a base of solid assets for young people who have not yet left home it is
important for parents to teach them the difference between an asset and a liability get them to start
building a solid asset column before they leave home get married buy a house have kids and get
stuck in a risky financial position clinging to a job and buying everything on credit i see so
many young couples who get married and trapped themselves into a lifestyle that will not let them
get out of debt for most of their working years for many people just as the last child
leaves home the parents realize they have not adequately prepared for retirement and
they begin to scramble to put some money away then their own parents become ill and they
find themselves with new responsibilities so what kind of assets am i suggesting that you
or your children acquire in my world real assets fall into the following categories businesses that
do not require my presence i own them but they are managed or run by other people if i have to work
there it's not a business it becomes my job stocks bonds income generating real estate notes ious
royalties from intellectual property such as music scripts and patents anything else that has value
produces income or appreciates and has a ready market as a young boy my educated dad encouraged
me to find a safe job but my rich dad encouraged me to begin acquiring assets that i loved if
you don't love it you won't take care of it i collect real estate simply because i love
buildings and land i love shopping for them and i could look at them all day long when problems
arise the problems aren't so bad that it changes my love for real estate for people who hate real
estate they shouldn't buy it i also love stocks of small companies especially startups because
i am an entrepreneur not a corporate person in my early years i worked in large organizations
such as standard oil of california the us marine corps and xerox corporation i enjoyed my time
with those organizations and have fond memories but i know deep down i am not a company man i like
starting companies not running them so my stock buys are usually of small companies sometimes
i even start the company and take it public fortunes are made in new stock issues and i
love the game many people are afraid of small cap companies and call them risky and they are
but that risk is diminished if you love what the investment is understand it and know the game
with small companies my investment strategy is to be out of the stock in a year on the other
hand my real estate strategy is to start small and keep trading up for bigger properties
and therefore delay paying taxes on the gain this allows the value to increase dramatically i
generally hold real estate less than seven years for years even while i was with the marine corps
and xerox i did what my rich dad recommended i kept my day job but i still minded my own
business i was active in my asset column trading real estate and small stocks rich dad always
stressed the importance of financial literacy the better i was at understanding
the accounting and cash management the better i would be at analyzing investments and
eventually starting and building my own company i don't encourage anyone to start a
company unless they really want to knowing what i know about running a company
i wouldn't wish that task on anyone there are times when people can't find employment and
starting the company seems like the best solution but the odds are against success nine
out of ten companies fail in five years of those that survive the first five years nine
out of every ten of those eventually fail as well so only if you really have the desire to own
your own company do i recommend it otherwise keep your day job and mind your own business
when i say mind your own business i mean to build and keep your asset column strong once
a dollar goes into it never let it come out think of it this way once a dollar goes into
your asset column it becomes your employee the best thing about money is that it works
24 hours a day and can work for generations keep your day job be a great hard-working
employee but keep building that asset column as your cash flow grows you can indulge in some
luxuries an important distinction is that rich people buy luxuries last while the poor and
middle class tend to buy luxuries first the poor and the middle class often buy luxury items
like big houses diamonds furs jewelry or boats because they want to look rich they look rich but
in reality they just get deeper in debt on credit the old money people the long term rich build
their asset column first then the income generated from the asset column buys their luxuries the poor
and middle class buy luxuries with their own sweat blood and children's inheritance a true luxury is
a reward for investing in and developing a real asset for example when my wife kim and i had
extra money coming from our apartment houses she went out and bought her mercedes it didn't
take any extra work or risk on her part because the apartment house bought the car she did however
have to wait four years while the real estate investment portfolio grew and began generating
enough extra cash flow to pay for the car but the luxury the mercedes was a true reward
because she proved she knew how to grow her asset column that car now means a lot more to her
than simply another pretty car it means she used her financial intelligence to afford it instead
most people impulsively go out and buy a new car or some other luxury on credit they may feel bored
and just want a new toy buying a luxury on credit often causes a person to eventually resent that
luxury because the debt becomes a financial burden after you've taken the time and invested
in and built your own business you are now ready to learn the biggest secret of the rich the
secret that puts the rich way ahead of the pack chapter 4 lesson 4 the history of
taxes and the power of corporations my rich dad just played the game smart and he did
it through corporations the biggest secret of the rich i remember in school being told the story of
robin hood and his merry men my teacher thought it was a wonderful story of a romantic hero
who robbed from the rich and gave to the poor my rich dad did not see robin hood as
a hero he called robin hood a crook robin hood may be long gone but his followers
live on i often still hear people say why don't the rich pay for it or the rich should
pay more in taxes and give it to the poor it is this robin hood fantasy or taking from the
rich to give to the poor that has caused the most pain for the poor and the middle class the reason
the middle class is so heavily taxed is because of the robin hood ideal the reality is that the
rich are not taxed it's the middle class who pays for the poor especially the educated upper income
middle class again to understand fully how things happen we need to look at the history of taxes
although my highly educated dad was an expert on the history of education my rich dad fashioned
himself an expert on the history of taxes rich dad explained to mike and me that originally
in england and america there were no taxes occasionally there were temporary taxes levied in
order to pay for wars the king or the president would put the word out and ask everyone to chip in
taxes were levied in britain for the fight against napoleon from 1799 to 1816 and in america
to pay for the civil war from 1861 to 1865. in 1874 england made income tax a permanent levy
on its citizens in 1913 an income tax became permanent in the united states with the adoption
of the 16th amendment to the u.s constitution at one time americans were anti-tax it had been
the tax on tea that led to the famous tea party in boston harbor an incident that helped ignite
the revolutionary war it took approximately 50 years in both england and the united states
to sell the idea of a regular income tax what these historical dates failed to reveal
is that both of these taxes were initially levied against only the rich it was this point
that rich dad wanted mike and me to understand he explained that the idea of taxes was
made popular and accepted by the majority by telling the poor and the middle class that
taxes were created only to punish the rich this is how the masses voted for the
law and it became constitutionally legal although it was intended to punish the rich in
reality it wound up punishing the very people who voted for it the poor and middle class once
government got a taste of money its appetite grew said rich dad your dad and i are exactly opposite
he's a government bureaucrat and i am a capitalist we get paid and our success is
measured on opposite behaviors he gets paid to spend money and hire people the
more he spends and the more people he hires the larger his organization becomes in the government
a large organization is a respected organization on the other hand within my organization the
fewer people i hire and the less money i spend the more i am respected by my investors that's
why i don't like government people they have different objectives than most business people as
the government grows more and more tax dollars are needed to support it my educated dad sincerely
believed that government should help people he loved john f kennedy and especially the idea
of the peace corps he loved the idea so much that both he and my mom worked for the peace
corps training volunteers to go to malaysia thailand and the philippines he always strived
for additional grants and budget increases so he could hire more people both in his job with
the education department and in the peace corps from the time i was about 10 years old i would
hear from my rich dad that government workers were a pack of lazy thieves and for my poor dad i would
hear how the rich were greedy crooks who should be made to pay more taxes both sides had valid
points it was difficult to go to work for one of the biggest capitalists in town and come home
to a father who was a prominent government leader it was not easy to know which dad to believe
yet when you study the history of taxes an interesting perspective emerges as i said the
passage of taxes was only possible because the masses believed in the robin hood
theory of economics take from the rich and give to everyone else the problem was that
the government's appetite for money was so great that taxes soon needed to be levied on the middle
class and from there it kept trickling down however the rich saw an opportunity because
they don't play by the same set of rules the rich knew about corporations which
became popular in the days of sailing ships the rich created the corporation as a vehicle to
limit their risk to the assets of each voyage the rich put their money into a corporation to finance
the voyage the corporation would then hire a crew to sail to the new world to look for treasure
if the ship was lost the crew lost their lives but the loss to the rich would be limited only to
the money they invested for that particular voyage it is the knowledge of the legal corporate
structure that really gives the rich a vast advantage over the poor and middle class having
two fathers teaching me one a socialist and the other a capitalist i quickly began to realize
that the philosophy of the capitalist made more financial sense to me it seemed to me that the
socialists ultimately penalized themselves due to their lack of financial education no matter what
the take from the rich crowd came up with the rich always found a way to outsmart them that is how
taxes were eventually levied on the middle class the rich outsmarted the intellectuals solely
because they understood the power of money a subject not taught in schools how did the rich
outsmart the intellectuals once the take from the rich tax was passed cash started flowing into
government coffers initially people were happy money was handed out to government workers and
the rich it went to government workers in the form of jobs and pensions and it went to the rich
via their factories receiving government contracts the government received a large pool of money
but the problem was the fiscal management of that money the government ideal is to avoid
having excess money if you fail to spend your allotted funds you risk losing it in the next
budget you would certainly not be recognized for being efficient business people on the
other hand are rewarded for having excess money and are applauded for their efficiency as this
cycle of growing government spending continued the demand for money increased and the tax the rich
idea was adjusted to include lower income levels down to the very people who voted it in the poor
and the middle class true capitalists used their financial knowledge to simply find and escape they
headed back to the protection of a corporation but what many people who have never formed a
corporation don't know is that a corporation is not really a thing a corporation is merely
a file folder with some legal documents in it sitting in some attorney's office and
registered with a state government agency it's not a big building or a factory or a group
of people a corporation is merely a legal document that creates a legal body without a soul using it
the wealth of the rich was once again protected it was popular because the income tax rate of a
corporation is less than the individual income tax rates in addition certain expenses could
be paid by a corporation with pre-tax dollars this war between the haves and have-nots
has raged for hundreds of years the battle is waged whenever and wherever laws
are made and it will go on forever the problem is that the people who lose are the uninformed
the ones who get up every day and diligently go to work and pay taxes if they only understood
the way the rich play the game they could play it too then they would be on their way to their
own financial independence this is why i cringe every time i hear a parent advise their children
to go to school so they can find a safe secure job an employee with a safe secure job without
financial aptitude has no escape average americans today work five to six months for
the government just to cover their taxes in my opinion that is simply too long the harder
you work the more you pay the government that is why i believe that the idea of take from the
rich backfired on the very people who voted it in every time people try to punish the rich the rich
don't simply comply they react they have the money power and intent to change things they don't
just sit there and voluntarily pay more taxes instead they search for ways to minimize
their tax burden they hire smart attorneys and accountants and persuade politicians
to change laws or create legal loopholes they use their resources to affect change the
tax code of the united states also allows other ways to reduce taxes most of these vehicles are
available to anyone but it is the rich who find them because they are minding their own business
for example 1031 is jargon for section 1031 of the internal revenue code which allows a seller
to delay paying taxes on a piece of real estate that is sold for a capital gain through an
exchange for a more expensive piece of real estate real estate is one investment vehicle that
has a great tax advantage as long as you keep trading up in value you will not be taxed on the
gains until you liquidate people who don't take advantage of these legal tax savings are missing
a great opportunity to build their asset columns the poor and middle class don't have the same
resources they sit there and let the government's needles enter their arm and allow the blood
donation to begin today i am constantly shocked at the number of people who pay more taxes
or take fewer deductions simply because they are afraid of the government i have friends who
have had their businesses shut down and destroyed only to find out it was a mistake on the part of
the government i realize all that but the price of working from january to may is a high price to
pay for that intimidation my poor dad never fought back my rich dad didn't either he just played the
game smarter and he did it through corporations the biggest secret of the rich you may remember
the first lesson i learned from my rich dad i was a little boy of nine who had to sit
and wait for him to choose to talk to me i sat in his office waiting for him to get
to me he was ignoring me on purpose he wanted me to recognize his power and to desire
to have that power for myself one day during all the years i studied and learned from
him he always reminded me that knowledge is power and with money comes great power that requires the
right knowledge to keep it and make it multiply without that knowledge the world pushes you around
rich dad constantly reminded mike and me that the biggest bully was not the boss or the supervisor
but the tax man the tax man will always take more if you let him the first lesson of having money
work for you as opposed to you working for money is all about power if you work for money you give
the power to your employer if money works for you you keep the power and control it once we had this
knowledge of the power of money working for us he wanted us to be financially
smart and not let anyone or anything push us around if you're ignorant it's easy to
be bullied if you know what you're talking about you have a fighting chance that is why he
paid so much for smart tax accountants and attorneys it was less expensive to pay them than
to pay the government his best lesson to me was be smart and you won't be pushed around as much he
knew the law because he was a law-abiding citizen and because it was expensive to not know the
law if you know you're right you're not afraid of fighting back even if you are taking
on robin hood and his band of merry men my highly educated dad always encouraged me
to land a good job with a strong corporation he spoke of the virtues of working your way up
the corporate ladder he didn't understand that by relying solely on a paycheck from a corporate
employer i would be a docile cow ready for milking when i told my rich dad of my
father's advice he only chuckled why not own the ladder was always said as a young boy i did not understand what rich dad
meant by owning my own corporation it was an idea that seemed impossible and intimidating although
i was excited by the idea my inexperience wouldn't let me envision the possibility that grown-ups
would someday work for a company i would own the point is that if not for my rich dad i would
have probably followed my educated dad's advice it was merely the occasional reminder of my rich dad
that kept the idea of owning my own corporation alive and kept me on a different path by the time
i was 15 or 16 i knew i wasn't going to continue down the path my educated dad recommended i didn't
know how i was going to do it but i was determined not to head in the direction most of my classmates
were heading that decision changed my life it was not until my mid-twenties that my rich
dad's advice began to make more sense to me i was just out of the marine corps and working for
xerox i was making a lot of money but every time i looked at my paycheck i was disappointed the
deductions were so large and the more i worked the greater they became as i became more successful my
bosses talked about promotions and raises it was flattering but i could hear my rich dad asking in
my ear who are you working for who are you making rich in 1974 while still an employee for xerox i
formed my first corporation and began minding my own business there were already a few assets in
my asset column but now i was determined to focus on making it bigger those paychecks with all
the deductions made all the years of my rich dad's advice make total sense i could see the
future if i followed my educated dad's advice many employers feel that advising their workers
to mind their own business is bad for business but for me focusing on my own business and developing
assets made me a better employee because i now had a purpose i came in early and worked diligently
amassing as much money as possible so i could invest in real estate hawaii was just set
to boom and there were fortunes to be made the more i realized that we were in the beginning
stages of a boom the more xerox machines i sold the more i sold the more money i made and
of course the more deductions came out of my paycheck it was inspiring i wanted out of the
employee trap so badly that i worked even harder so i could invest more by 1978 i was consistently
one of the top five sales people at the company i badly wanted out of the rat race in less
than three years i was making more in my real estate holding corporation than i was making
at xerox and the money i was making in my asset column in my own corporation was money working
for me not me pounding on doors selling copiers my rich dad's advice made much more sense soon the
cash flow for my properties were so strong that my company bought me my first porsche my fellow xerox
salespeople thought i was spending my commissions i wasn't i was investing my commissions in assets
my money was working hard to make more money each dollar in my asset column was a great
employee working hard to make more employees and buy the boss a new porsche with before
tax dollars i began to work harder for xerox the plan was working and my porsche was the proof
by using the lessons i learned from my rich dad i was able to get out of the proverbial rat
race at an early age it was made possible because of the strong financial knowledge
i had acquired through rich dad's lessons without this financial knowledge which i
call financial intelligence or financial iq my road to financial independence
would have been much more difficult i now teach others in the hope that
i may share my knowledge with them i remind people that financial iq is made up
of knowledge from four broad areas of expertise one accounting accounting is financial literacy
or the ability to read numbers this is a vital skill if you want to build an empire the more
money you are responsible for the more accuracy is required or the house comes tumbling down
this is the left brain side or the details financial literacy is the ability to
read and understand financial statements which allows you to identify the
strengths and weaknesses of any business two investing investing is the
science of money making money this involves strategies and formulas which
use the creative right-brain side three understanding markets understanding markets is the
science of supply and demand you need to know the technical aspects of the market which are emotion
driven in addition to the fundamental or economic aspects of an investment does an investment
make sense or does it not make sense based on current market conditions 4.
The law a corporation
wrapped around the technical skills of accounting investing and markets can contribute to explosive
growth a person who understands the tax advantages and protections provided by a corporation can
get rich so much faster than someone who is an employee or a small business sole proprietor
it's like the difference between someone walking and someone flying the difference is
profound when it comes to long-term wealth tax advantages a corporation can do many things
that an employee cannot like pay expenses before paying taxes that is a whole area of expertise
that is very exciting employees earn and get taxed and then try to live on what is left a corporation
earns spends everything it can and is taxed on anything that is left it's one of the biggest
legal tax loopholes that the rich use they're easy to set up and are not expensive if you own
investments that are producing good cash flow for example by owning your own corporation
your vacations can be board meetings in hawaii car payments insurance repairs and health
club memberships are company expenses most restaurant meals are partial expenses and on
and on but it's done legally with pre-tax dollars protection from lawsuits we live in a litigious
society everybody wants a piece of your action the rich hide much of their wealth using vehicles
such as corporations and trusts to protect their assets from creditors when someone sues a wealthy
individual they are often met with layers of legal protection and often find that the wealthy person
actually owns nothing they control everything but own nothing the poor and middle class try to
own everything and lose it to the government or to fellow citizens who like to sue the rich they
learned it from the robin hood story take from the rich and give it to the poor it is not the purpose
of this audio book to go into the specifics of owning a corporation but i will say that if you
own any kind of legitimate assets i would consider finding out more about the benefits and protection
offered by a corporation as soon as possible there are many books written on the subject that
will detail the benefits and even walk you through the steps necessary to set up a corporation
garrett sutton's books on corporations provide wonderful insight into the power of personal
corporations financial iq is actually the synergy of many skills and talents i would say it is the
combination of the four technical skills listed above that make up basic financial intelligence if
you aspire to great wealth it is the combination of these skills that will greatly amplify your
financial intelligence in summary business owners with corporations one earn two spend three pay
taxes employees who work for corporations one earn two pay taxes three spend as part of your
overall financial strategy i recommend that you learn about the protection that legal
entities can provide for businesses and assets chapter 5 lesson five the rich invent money
often in the real world it's not the smart who get ahead but the bold last night i took a
break from writing and watched a tv program on the history of a young man named alexander graham
bell bell had just patented his telephone and was having growing pains because the demand for his
new invention was so strong needing a bigger company he then went to the giant at that time
western union and asked them if they would buy his patent and his tiny company he wanted one
hundred thousand dollars for the whole package the president of western union scoffed at
him and turned him down saying the price was ridiculous the rest is history a multi-billion
dollar industry emerged and a t was born the evening news came on right after the story
of alexander graham bell on the news was a story of another downsizing at a local company the
workers were angry and complained that the company ownership was unfair a terminated
manager of about 45 years of age had his wife and two babies at the plant and was begging
the guards to let him talk to the owners to ask if they would reconsider his termination he had
just bought a house and was afraid of losing it the camera focused in on his pleading for all the
world to see needless to say it held my attention i have been teaching professionally since 1984.
it has been a great experience and a rewarding one it is also a disturbing profession for
i have taught thousands of individuals and i see one thing in common in all of us myself
included we all have tremendous potential and we all are blessed with gifts yet the one thing that
holds all of us back is some degree of self-doubt it is not so much the lack of technical
information that holds us back but more the lack of self-confidence some are more
affected than others once we leave school most of us know that it is not so much a matter of college
degrees or good grades that count in the real world outside of academics something more than
just grades is required i have heard it called many things guts chutzpah balls audacity bravado
cunning daring tenacity and brilliance this factor whatever it is labeled ultimately decides
one's future much more than school grades do inside each of us is one of these brave brilliant
and daring characters there is also the flip side of that character people who could get down
on their knees and beg if necessary after a year in vietnam as a marine corps pilot i got to know
both of those characters inside of me intimately one is not better than the other yet
as a teacher i recognized that it was excessive fear and self-doubt that were
the greatest detractors of personal genius it broke my heart to see students know the
answers yet lack the courage to act on the answer often in the real world it's not the smart who
get ahead but the bold in my personal experience your financial genius requires both technical
knowledge as well as courage if fear is too strong the genius is suppressed in my classes i
strongly urge students to learn to take risks to be bold and to let their genius convert that
fear into power and brilliance it works for some and just terrifies others i have come to realize
that for most people when it comes to the subject of money they would rather play it safe i have
had to field questions such as why take risks why should i bother developing my financial iq why
should i become financially literate and i answer just to have more options there are huge changes
up ahead in the coming years there will be more people just like the young inventor alexander
graham bell there will be a hundred people like bill gates and hugely successful companies like
microsoft created every year all over the world and there will also be many more bankruptcies
layoffs and downsizings so why bother developing your financial iq no one can answer that but
you yet i can tell you why i myself do it i do it because it is the most exciting time
to be alive i'd rather be welcoming change than dreading change i'd rather be excited about making
millions than worrying about not getting a raise this period we are in now is a most exciting time
unprecedented in our world's history generations from now people will look back at this period of
time and remark at what an exciting era it must have been it was the death of the old and birth of
the new it was full of turmoil and it was exciting so why bother developing your financial iq
because if you do you will prosper greatly and if you don't this period of time will be a
frightening one it will be a time of watching some people move boldly forward while
others cling to worn out life preservers land was wealth 300 years ago so the
person who owned the land owned the wealth later wealth was in factories and production and
america rose to dominance the industrialist owned the wealth today wealth is in information and
the person who has the most timely information owns the wealth the problem is that information
flies around the world at the speed of light the new wealth cannot be contained by boundaries
and borders as land and factories were the changes will be faster and more dramatic there
will be a dramatic increase in the number of new multi-millionaires there also will be those who
are left behind i find so many people struggling today often working harder simply because they
cling to old ideas they want things to be the way they were and they resist change i know people
who are losing their jobs or their houses and they blame technology or the economy or their boss
sadly they fail to realize that they might be the problem old ideas are their biggest liability it
is a liability simply because they fail to realize that while that idea or way of doing something was
an asset yesterday yesterday is gone one afternoon i was teaching how to invest using a board game i
had invented cash flow as a teaching tool a friend had brought someone along to attend the class
this friend of a friend was recently divorced had been badly burned in the divorce settlement
and was now searching for some answers her friend thought the class might help the game was designed
to help people learn how money works in playing the game they learn about the interaction of
the income statement with the balance sheet they learn how cash flows between the two and how
the road to wealth is through striving to increase your monthly cash flow from the asset column to
the point that it exceeds your monthly expenses once you accomplish this you are able to get
out of the rat race and out onto the fast track as i have said some people hate the game
some love it and others missed the point this woman missed a valuable opportunity to learn
something in the opening round she drew a doodad card with the boat on it at first she was happy
oh i've got a boat then as her friend tried to explain how the numbers worked on her income
statement and balance sheet she got frustrated because she had never liked math the rest of her
table waited while her friend continued explaining the relationship between the income statement
balance sheet and monthly cash flow suddenly when she realized how the numbers worked it
dawned on her that her boat was eating her alive later on in the game she was also downsized and
had a child it was a horrible game for her after the class her friend came by and told me that
she was upset she had come to the class to learn about investing and did not like the idea that
it took so long to play a silly game her friend attempted to tell her to look within herself
to see if the game reflected her in any way with that suggestion the woman demanded her
money back she said that the very idea that a game could be a reflection of her was ridiculous
her money was promptly refunded and she left since 1984 i have made millions simply by
doing what the school system does not do in school most teachers lecture i hated lectures
as a student i was soon bored and my mind would drift in 1984 i began teaching via games and
simulations and i still rely on these tools today i always encourage adult students to
look at games as reflecting back to them what they know and what they need to learn
most importantly games reflect behavior they are instant feedback systems
instead of the teacher lecturing you the game is giving you a personalized lecture one
that is custom made just for you the friend of the woman who left later called to give me an update
she said her friend was fine and had calmed down in her cooling off period she could see some
slight relationship between the game and her life although she and her husband did not own a boat
they did own everything else imaginable she was angry after their divorce both because he had
run off with a younger woman and because after 20 years of marriage they had accumulated little in
the way of assets there was virtually nothing for them to split their 20 years of married life had
been incredible fun but all they had accumulated was a ton of doodads she realized that her anger
at doing the numbers the income statement and balance sheet came from her embarrassment about
not understanding them she believed that finances were the man's job she maintained the house and
did the entertaining and he handled the finances she was now quite certain that in the last
five years of their marriage he had hidden money from her she was angry at herself for not
being more aware of where the money was going as well as for not knowing about the other
woman just like a board game the world is always providing us with instant feedback
we could learn a lot if we tuned in more one day not long ago i complained to my wife
that the cleaners must have shrunk my pants my wife gently smiled and poked me in the stomach
to inform me that the pants had not shrunk something else had expanded me the cash flow
game was designed to give every player personal feedback its purpose is to give you options if
you draw the boat card and it puts you into debt the question is now what can you do how many
different financial options can you come up with that is the purpose of the game to teach
players to think and create new and various financial options thousands of people
throughout the world have played this game the players who get out of the rat race
the quickest are the people who understand numbers and have creative financial minds
they recognize different financial options rich people are often creative and take calculated
risks people who take the longest are people who are not familiar with numbers and often
do not understand the power of investing some people playing cash flow gain lots of money
in the game but they don't know what to do with it even though they have money everyone else seems
to be getting ahead of them and that is true in real life there are a lot of people who have
a lot of money and do not get ahead financially limiting your options is the same as hanging on
to old ideas i have a friend from high school who now works at three jobs years ago
he was the richest of all my classmates when the local sugar plantation closed the company
he worked for went down with the plantation in his mind he had but one option and that
was the old option work hard the problem was that he couldn't find an equivalent job that
recognized his seniority from the old company as a result he is overqualified for the jobs
he currently has so his salary is lower he now works three jobs to earn enough to survive i have
watched people playing cash flow complain that the right opportunity cards are not coming their
way so they sit there i know people who do that in real life they wait for the right opportunity
i have watched people get the right opportunity card and then not have enough money then they
complained that they would have gotten out of the rat race if they had had more money so they sit
there i know people in real life who do that also they see all the great deals but they have
no money and i have seen people pull a great opportunity card read it out loud and have no idea
that it is a great opportunity they have the money the time is right they have the card but they
can't see the opportunity staring them in the face they fail to see how it fits into their
financial plan for escaping the rat race and i know more people like that than all the
others combined most people have an opportunity of a lifetime flash right in front of them and
they fail to see it a year later they find out about it after everyone else got rich financial
intelligence is simply having more options if the opportunities aren't coming your way what
else can you do to improve your financial position if an opportunity lands in your lap and you have
no money and the bank won't talk to you what else can you do to get the opportunity to work in
your favor if your hunch is wrong and what you've been counting on doesn't happen how can you turn a
lemon into millions that is financial intelligence it is not so much what happens but how many
different financial solutions you can think of to turn a lemon into millions it is how
creative you are in solving financial problems most people only know one solution work hard save
and borrow so why would you want to increase your financial intelligence because you want to be
the kind of person who creates your own luck you take whatever happens and make it better
few people realize that luck is created just as money is and if you want to be luckier and
create money instead of working hard then your financial intelligence is important if you are the
kind of person who is waiting for the right thing to happen you might wait for a long time it's like
waiting for all the traffic lights to be green for five miles before you'll start your trip as young
boys mike and i were constantly told by my rich dad that money is not real rich dad occasionally
reminded us of how close we came to the secret of money on that first day we got together and began
making money out of plaster of paris the poor and middle class work for money he would say the rich
make money the more real you think money is the harder you will work for it if you can grasp the
idea that money is not real you will grow richer faster what is it was a question mike and i often
came back with what is money if it is not real what we agree it is was all rich dad would say the
single most powerful asset we all have is our mind if it is trained well it can create enormous
wealth seemingly instantaneously an untrained mind can also create extreme poverty that can crush
a family for generations in the information age money is increasing exponentially a few
individuals are getting ridiculously rich from nothing just ideas and agreements if you ask
many people who trade stocks or other investments for a living they see it done all the time often
millions can be made instantaneously from nothing and by nothing i mean no money was exchanged it is
done via agreement a hand signal in a trading pit a blip on a trader's screen in lisbon
from a trader's screen in toronto and back to lisbon a call to my broker to buy and
a moment later to sell money did not change hands agreements did so why develop your financial
genius only you can answer that i can tell you why i have been developing this area of my
intelligence i do it because i want to make money fast not because i need to but because i want to
it is a fascinating learning process i develop my financial iq because i want to participate in
the fastest game and biggest game in the world and in my own small way i would like to be part of
this unprecedented evolution of humanity the era where humans work purely with their minds and not
with their bodies besides it is where the action is it is what is happening it's hip it's scary
and it's fun that is why i invest in my financial intelligence developing the most powerful asset
i have i want to be with people moving boldly forward i do not want to be with those left behind
i will give you a simple example of creating money in the early 1990s the economy of phoenix
arizona was horrible i was watching a tv show when a financial planner came on and began
forecasting doom and gloom his advice was to save money put 100 away every month he said in
40 years you will be a multi-millionaire well putting money away every month is a sound idea it
is one option the option most people subscribe to the problem is this it blinds the person to what
is really going on it causes them to miss major opportunities for much more significant growth
of their money the world is passing them by as i said the economy was terrible at that time
for investors this is the perfect market condition a chunk of my money was in the stock market and
in apartment houses i was short of cash because people were giving properties away i was buying
i was not saving money i was investing kim and i had more than a million dollars in cash
working in a market that was rising fast it was the best opportunity to invest the economy
was terrible i just could not pass up these small deals houses that were once one hundred thousand
dollars were now seventy five thousand dollars but instead of shopping with local real estate
agents i began shopping at the bankruptcy attorney's office or the courthouse steps in
these shopping places a seventy five thousand dollar house could sometimes be bought for twenty
thousand dollars or less for two thousand dollars which was loaned to me from a friend
for ninety days for two hundred dollars i gave an attorney a cashier's check as a down
payment while the acquisition was being processed i ran an ad advertising a seventy five thousand
dollar house for only sixty thousand dollars and no money down the phone rang hard and heavy
prospective buyers were screened and once the property was legally mined all the prospective
buyers were allowed to look at the house it was a feeding frenzy the house sold in a few minutes
i asked for a two thousand five hundred dollar processing fee which they gladly handed over and
the escrow and title company took over from there i returned the two thousand dollars to my
friend with an additional two hundred dollars he was happy the home buyer was happy the attorney
was happy and i was happy i had sold a house for sixty thousand dollars that cost me twenty
thousand dollars the forty thousand dollars was created for money in my asset column in
the form of a promissory note from the buyer total working time five hours so now that you are
on your way to becoming more financially literate and skilled at reading numbers i will tell you
why this is an example of money being invented during this depressed market kim and i were
able to do six of these simple transactions in our spare time while the bulk of our money
was in larger properties and the stock market we were able to create more than one hundred
ninety thousand dollars in assets notes at ten percent interest in those six buy create and
sell transactions that comes to approximately nineteen thousand dollars a year income much
of it sheltered through our private corporation much of that nineteen thousand dollars
a year goes to pay for our company cars gas trips insurance dinners with clients
and other things by the time the government gets a chance to tax that income it's been
spent on legally allowed pre-tax expenses this was a simple example of how money is invented
created and protected using financial intelligence ask yourself how long would it take to
save 190 000 would the bank pay you 10 interest on your money and the
promissory note is good for thirty years i hope they never pay me the one
hundred ninety thousand dollars i have to pay a tax if they pay me the
principal and besides nineteen thousand dollars paid over thirty years is a little
over five hundred thousand dollars in income i have people ask what happens if the person
doesn't pay that does happen and it's good news that sixty thousand dollar home could be
taken back and resold for seventy thousand dollars and another two thousand five hundred
dollars collected as a loan processing fee it would still be a zero down transaction in the
mind of the new buyer and the process would go on the first time i sold the house i
paid back the two thousand dollars so technically i have no money in the transaction
my return on investment roi is infinity it's an example of no money making a lot of money in the
second transaction when resold i would have put two thousand dollars in my pocket and re-extended
the loan to 30 years what would my roi be if i got paid money to make money i do not know but it sure
beats saving one hundred dollars a month which actually starts out as 150 dollars because it's
after tax income for 40 years earning low interest and again you're taxed on the interest that is not
too intelligent it may be safe but it's not smart a few years later as the phoenix real estate
market strengthened those houses we sold for sixty thousand dollars became worth a hundred ten
thousand dollars foreclosure opportunities were still available but became rare it cost a valuable
asset my time to go out looking for them thousands of buyers were looking for the few available deals
the market had changed it was time to move on and look for other opportunities to put in the asset
column you cannot do that here that is against the law you're lying i hear those comments much
more often than can you show me how to do that the math is simple you do not need algebra
or calculus and the escrow company handles the legal transaction and the servicing
of the payments i have no roofs to fix or toilets to unplug because the owners do that
it's their house occasionally someone does not pay and that is wonderful because there are late fees
or they move out and the property is sold again the court system handles that and it may not
work in your area the market conditions may be different but the example illustrates how a simple
financial process can create hundreds of thousands of dollars with little money and low risk it
is an example of money being only an agreement anyone with a high school education can do it
yet most people won't most people listen to the standard advice of work hard and save money
for about thirty hours of work approximately one hundred ninety thousand dollars was created
in the asset column and no taxes were paid which one sounds harder to you one work
hard pay fifty percent in taxes save what is left your savings then earn five percent
which is also taxed or two take the time to develop your financial intelligence harness
the power of your brain and the asset column if you use option number one be sure to factor
in how much time it takes you to save one hundred ninety thousand 000 time is one of your greatest
assets now you may understand why i silently shake my head when i hear parents say my child is doing
well in school and receiving a good education it may be good but is it adequate i know
the above investment strategy is a small one it is used to illustrate how small can
grow into big again my success reflects the importance of a strong financial foundation
which starts with a strong financial education i have said it before but it's worth repeating
financial intelligence is made up of these four main technical skills one accounting accounting
is financial literacy or the ability to read numbers this is a vital skill if you want to
build businesses or investments two investing investing is the science of money making money three understanding markets understanding markets
is the science of supply and demand alexander graham bell gave the market what it wanted so did
bill gates a seventy five thousand dollar house offered for sixty thousand dollars that cost
twenty thousand dollars was also the result of seizing an opportunity created by the market
somebody was buying and someone was selling four the law the law is the awareness of
accounting corporate state and federal regulations i recommend playing by the rules it is this basic
foundation or the combination of these skills that is needed to be successful in the pursuit
of wealth whether it be through the buying of small homes apartment buildings companies stocks
bonds precious metals baseball cards or the like a few years later the real estate market rebounded
and everyone else was getting in the stock market was booming and everyone was getting in the u.s
economy was getting back on its feet i began selling and was now traveling to peru norway
malaysia and the philippines the investment landscape had changed we were no longer buying
real estate now i just watched the values climb inside the asset column and will probably begin
selling i suspect that some of those six little house deals will sell and the forty thousand
dollar note will be converted to cash i need to call my accountant to be prepared for cash and
seek ways to shelter it the point i would like to make is that investments come and go the market
goes up and comes down economies improve and crash the world is always handing you opportunities of a
lifetime every day of your life but all too often we fail to see them but they are there
and the more the world changes and the more technology changes the more opportunities
there will be to allow you and your family to be financially secure for generations to come so
why bother developing your financial intelligence again only you can answer that i know
why i continue to learn and develop i do it because i know there are changes coming
i'd rather welcome change than cling to the past i know there will be market booms and
market crashes i want to continually develop my financial intelligence because at each
market change some people will be on their knees begging for their jobs others meanwhile
will take the lemons that life hands them and we are all handed lemons occasionally and turn
them into millions that's financial intelligence i am often asked about the lemons i have turned
into millions i hesitate using many more examples of personal investments because i am afraid it
comes across as bragging or tooting my own horn that is not my intention i use the examples only
as numerical and chronological illustrations of actual and simple cases i use the examples
because i want you to know that it is easy and the more familiar you become with the four pillars
of financial intelligence the easier it becomes personally i use two main vehicles to achieve
financial growth real estate and small cap stocks i use real estate as my foundation day in and
day out my properties provide cash flow and occasional spurts of growth and value the small
cap stocks are used for fast growth i do not recommend anything that i do the examples are just
that examples if the opportunity is too complex and i do not understand the investment i don't do
it simple math and common sense are all you need to do well financially there are five reasons for
using examples one to inspire people to learn more two to let people know it is easy if the
foundation is strong three to show that anyone can achieve great wealth four to show that
there are millions of ways to achieve your goals five to show that it's not rocket science in 1989
i used to jog through a lovely neighborhood in portland oregon it was the suburb that had little
gingerbread houses they were small and cute i almost expected to see little red riding hood
skipping down the sidewalk on her way to granny's there were for sale signs everywhere the timber
market was terrible the stock market had just crashed and the economy was depressed on one
street i noticed a for sale sign that was up longer than most it looked old jogging past it
one day i ran into the owner who looked troubled what are you asking for your house i asked the
owner turned and smiled weekly make me an offer he said it's been for sale for over a year nobody
even comes by anymore to look at it i'll look i said and i bought the house a half hour later for
twenty thousand dollars less than his asking price it was a cute little two-bedroom home with
gingerbread trim on all the windows it was light blue with gray accents and had been built in 1930
inside there was a beautiful rock fireplace as well as two tiny bedrooms it was a perfect rental
house i gave the owner five thousand dollars down for a forty five thousand dollar house that was
really worth sixty five thousand dollars except that no one wanted to buy it the owner moved out
in a week happy to be free and my first tenant moved in a local college professor after the
mortgage expenses and management fees were paid i put a little less than 40 dollars in my pocket at
the end of each month hardly exciting a year later the depressed oregon real estate market had begun
to pick up california investors flush with money from their still booming real estate market were
moving north and buying up oregon and washington i sold that little house for ninety five thousand
dollars to a young couple from california who thought it was a bargain my capital
gains of approximately forty thousand dollars were placed into a 1031 tax deferred exchange
and i went shopping for a place to put my money in about a month i found a 12 unit apartment house
right next to the intel plant in beaverton oregon the owners lived in germany had no idea what the
place was worth and again just wanted to get out of it i offered two hundred seventy five thousand
dollars for a four hundred fifty thousand dollar building they agreed to three hundred thousand
dollars i bought it and held it for two years utilizing the same 1031 exchange process we sold
the building for four hundred ninety five thousand dollars and bought a 30 unit apartment building
in phoenix arizona we had moved to phoenix by then to get out of the rain and needed to sell
anyway like the former oregon market the real estate market in phoenix was depressed the price
of the thirty unit apartment building in phoenix was eight hundred seventy five thousand dollars
with two hundred twenty five thousand dollars down the cash flow from the thirty units was
a little over five thousand dollars a month the arizona market began moving up and a few years
later a colorado investor offered us 1.2 million dollars for the property the point of this example
is how a small amount can grow into a large amount again it is a matter of understanding financial
statements investment strategies a sense of the market and the laws if people are not versed
in these subjects then obviously they must follow standard dogma which is to play it safe
diversify and only invest in secure investments the problem with secure investments is that they
are often sanitized that is made so safe that the gains are less most large brokerage houses
will not touch speculative transactions in order to protect themselves and their clients
and that is a wise policy the really hot deals are not offered to people who are novices often
the best deals that make the rich even richer are reserved for those who understand the game it
is technically illegal to offer speculative deals to someone who is considered not sophisticated but
of course it happens the more sophisticated i get the more opportunities come my way another case
for developing your financial intelligence over a lifetime is simply that more opportunities are
presented to you and the greater your financial intelligence the easier it is to tell whether a
deal is good it's your intelligence that can spot a bad deal or make a bad deal good the more
i learn and there is a lot to learn the more money i make simply because i gain experience and
wisdom as the years go on i have friends who are playing it safe working hard at their profession
and failing to gain financial wisdom which does take time to develop my overall philosophy is
to plant seeds inside my asset column that is my formula i start small and plant seeds some grow
some don't inside our real estate corporation we have property worth several million dollars it
is our own right or real estate investment trust the point i'm making is that most of those
millions started out as little five thousand dollar to ten thousand dollar investments all of
those down payments were fortunate to catch a fast rising market and increased tax free we traded
in and out several times over a number of years we also own a stock portfolio surrounded
by a corporation that kim and i call our personal mutual fund we have friends who
deal specifically with investors like us who have extra money each month to invest we
buy high risk speculative private companies that are just about to go public on a
stock exchange in the united states or canada an example of how fast gains can be made
are one hundred thousand shares purchased for twenty five cents each before the company
goes public six months later the company is listed and the one hundred thousand shares
now are worth two dollars each if the company is well managed the price keeps going up and the
stock may go to twenty dollars or more per share there are years when our twenty five thousand
dollars has gone to a million in less than a year it is not gambling if you know what you're doing it is gambling if you're just throwing money
into a deal and praying the idea in anything is to use your technical knowledge wisdom and love
of the game to cut the odds down to lower the risk of course there is always risk it is financial
intelligence that improves the odds thus what is risky for one person is less risky to someone else
that is the primary reason i constantly encourage people to invest more in their financial education
than in stocks real estate or other markets the smarter you are the better chance you
have of beating the odds the stock plays i personally invested in were extremely high risk
for most people and absolutely not recommended i have been playing that game since 1979
and have paid more than my share in dues but if you will review why investments
such as these are high risk for most people you may be able to set your life up differently
so that the ability to take twenty five thousand dollars and turn it into one million dollars
in a year is low risk for you as stated earlier nothing i have written is a recommendation it
is only used as an example of what is simple and possible what i do is small potatoes in the grand
scheme of things yet for the average individual a passive income of more than one hundred thousand
dollars a year is nice and not hard to achieve depending on the market and how smart you
are it could be done in five to ten years if you keep your living expenses modest hundred
thousand dollars coming in as additional income is pleasant regardless of whether you work you can
work if you like or take time off if you choose and use the government tax system in your favor
rather than against you my personal basis is real estate i love real estate because it's stable and
slow moving i keep the base solid the cash flow is fairly steady and if properly managed has a good
chance of increasing in value the beauty of a solid base of real estate is that it allows me to
take greater risks as i do with speculative stocks if i make great profits in the stock market
i pay my capital gains tax on the gain and then reinvest what's left in real estate
again further securing my asset foundation a last word on real estate i have traveled
all over the world and taught investing in every city i hear people say you cannot buy real
estate cheap that is not my experience even in new york or tokyo or just on the outskirts of the
city prime bargains are overlooked by most people in singapore with their high real estate prices
there are still bargains to be found within a short driving distance so whenever i hear someone
say you can't do that here pointing at me i remind them that maybe the real statement is i don't know
how to do that here yet great opportunities are not seen with your eyes they are seen with your
mind most people never get wealthy simply because they are not trained financially to recognize
opportunities right in front of them i am often asked how do i start in the final chapter of
this audiobook i offer 10 steps that i followed on the road to my financial freedom but always
remember to have fun when you learn the rules and the vocabulary of investing and begin to build
your asset column i think you'll find that it's as fun a game as you've ever played sometimes
you win and sometimes you learn but have fun most people never win because they're more afraid
of losing that is why i found school so silly in school we learn that mistakes are bad and we
are punished for making them yet if you look at the way humans are designed to learn we learn by
making mistakes we learn to walk by falling down if we never fell down we would never walk the same
is true for learning to ride a bike i still have scars on my knees but today i can ride a bike
without thinking the same is true for getting rich unfortunately the main reason most people are
not rich is because they are terrified of losing winners are not afraid of losing but losers
are failure is part of the process of success people who avoid failure also avoid success
i look at money much like my game of tennis i play hard make mistakes correct make
more mistakes correct and i get better if i lose the game i reach across the net shake
my opponent's hand smile and say see you next there are two kinds of investors one the first
and most common type is a person who buys a packaged investment they call a retail outlet
such as a real estate company a stock broker or financial planner and they buy something it
could be a mutual fund a right a stock or bond it is a clean and simple way of investing an
analogy would be a shopper who goes to a computer store and buys a computer right off the shelf
two the second type is an investor who creates investments this investor usually assembles a
deal in the same way a person who buys components builds a computer i do not know the first thing
about putting components of a computer together but i do know how to put pieces of opportunities
together or know people who know how it is this second type of investor
who is the more professional investor sometimes it may take years for
all the pieces to come together and sometimes they never do it is the second type
of investor that my rich dad encouraged me to be it is important to learn how to put the pieces
together because that is where the huge wins reside and sometimes some huge losses if the tide
goes against you if you want to be the second type of investor you need to develop three main skills
these skills are in addition to those required to become financially intelligent one find
an opportunity that everyone else missed you see with your mind what others miss with their
eyes for example a friend bought this run down old house it was spooky to look at everyone wondered
why he bought it what he saw that we did not was that the house came with four extra empty lots he
discovered that after going to the title company after buying the house he tore the house down
and sold the five lots to a builder for three times what he paid for the entire package he made
seventy five thousand dollars for two months of work it's not a lot of money but it sure beats
minimum wage and it's not technically difficult two raise money the average person only goes
to the bank this second type of investor needs to know how to raise capital and there
are many ways that don't require a bank to get started i learned how
to buy houses without a bank it was the learned skill of raising money more
than the houses themselves that was priceless all too often i hear people say the bank won't
lend me money or i don't have the money to buy it if you want to be a type 2 investor you need
to learn how to do that which stops most people in other words a majority of people let their
lack of money stop them from making a deal if you can avoid that obstacle you will be millions
ahead of those who don't learn those skills there have been many times i have bought
a house a stock or an apartment building without a penny in the bank i once bought
an apartment house for 1.2 million dollars i did what is called tying it up with a
written contract between seller and buyer i then raised the one hundred thousand dollar
deposit which bought me ninety days to raise the rest of the money why did i do it simply
because i knew it was worth two million dollars i never raised the money instead the person
who put up the one hundred thousand dollars gave me fifty thousand dollars for finding the
deal took over my position and i walked away total working time three days again it's
what you know more than what you buy investing is not buying it's more a case
of knowing three organize smart people intelligent people are those who work with or hire
a person who is more intelligent than they are when you need advice make sure you choose your
advisor wisely there is a lot to learn but the rewards can be astronomical if you do not want to
learn those skills then being a type 1 investor is highly recommended it is what you know that is
your greatest wealth it is what you do not know that is your greatest risk there is always risk
so learn to manage risk instead of avoiding it chapter six lesson six work
to learn don't work for money job security meant everything to my educated
dad learning meant everything to my rich dad a few years ago i granted an interview with a
newspaper in singapore the young female reporter was on time and the interview got underway
immediately we sat in the lobby of a luxurious hotel sipping coffee and discussing the purpose of
my visit to singapore i was to share the platform with zig ziglar he was speaking on motivation
and i was speaking on the secrets of the rich someday i would like to be a best-selling
author like you she said i had seen some of the articles she had written for the paper and i was
impressed she had a tough clear style of writing her articles held a reader's interest you have a
great style i said in reply what holds you back from achieving your dream my work does not seem to
go anywhere she said quietly everyone says that my novels are excellent but nothing happens so i keep
my job with the paper at least it pays the bills do you have any suggestions yes i do i said
brightly a friend of mine here in singapore runs a school that trains people to sell he runs sales
training courses for many of the top corporations here in singapore and i think attending one of
his courses would greatly enhance your career she stiffened are you saying i should go to school
to learn to sell i nodded you aren't serious are you again i nodded what is wrong with that i was
now backpedaling she was offended by something and now i was wishing i had not said anything in
my attempt to be helpful i found myself defending my suggestion i have a master's degree in english
literature why would i go to school to learn to be a salesperson i am a professional i went to school
to be trained in a profession so i would not have to be a salesperson i hate salespeople all they
want is money so tell me why i should study sales she was packing her briefcase the interview was
over on the coffee table set a copy of an earlier best-selling book i wrote i picked it up as well
as the notes she had jotted down on her legal pad do you see this i said pointing to her notes she
looked down at her notes what she said confused again i pointed deliberately to her notes on her
pad she had written robert kiyosaki best selling author it says best-selling author not best
writing author i said quietly her eyes widened i am a terrible writer i said you are a
great writer i went to sales school you have a master's degree put them together and you get
a best-selling author and a best writing author anger flared from her eyes i'll never
stoop so low as to learn how to sell people like you have no business writing
i'm a professionally trained writer and you are a salesman it is not fair she
fumed she put the rest of her notes away and hurried out through the large glass
doors into the humid singapore morning at least she gave me a fair and favorable
write-up the next morning the world is filled with smart talented educated and gifted people
we meet them every day they are all around us a few days ago my car was not running well i
pulled into a garage and the young mechanic had it fixed in just a few minutes he knew what was wrong
by simply listening to the engine i was amazed i am constantly shocked at how little talented
people earn i have met brilliant highly educated people who earn less than twenty thousand dollars
a year a business consultant who specializes in the medical trade was telling me how many doctors
dentists and chiropractors struggle financially all this time i thought that when they graduated
the dollars would pour in it was this business consultant who gave me the phrase they are one
skill away from great wealth what this phrase means is that most people need only to learn
and master one more skill and their income would jump exponentially i have mentioned before that
financial intelligence is a synergy of accounting investing marketing and law combined those four
technical skills and making money with money is easier than most people would believe when it
comes to money the only skill most people know is to work hard the classic example of a synergy
of skills was that young writer for the newspaper if she diligently learned the skills of sales and
marketing her income would jump dramatically if i were her i would take some courses in advertising
copywriting as well as sales then instead of working at the newspaper i would seek a job at an
advertising agency even if it were cut and pay she would learn how to communicate in shortcuts that
are used in successful advertising she also would spend time learning public relations an important
skill she would learn how to get millions in free publicity then at night and on weekends she could
be writing her great novel when it was finished she would be better able to sell her book then in
a short while she could be a best-selling author when i came out with my first book if you
want to be rich and happy don't go to school a publisher suggested i changed the
title to the economics of education i told the publisher that with a title like that
i would sell two books one to my family and one to my best friend the problem is that they
would expect it for free the obnoxious title if you want to be rich and happy don't go to
school was chosen because we knew it would get tons of publicity i am pro-education and believe
in education reform if i were not pro-education why would i continue to press for changing our
antiquated educational system so i chose a title that would get me on more tv and radio shows
simply because i was willing to be controversial many people thought i was a fruitcake but the
book sold and sold when i graduated from the u.s merchant marine academy in 1969 my educated dad
was happy standard oil of california had hired me for its oil tanker fleet as a third mate the
pay was low compared with my classmates but it was okay for a first real job after college my
starting pay was about forty two thousand dollars a year including overtime and i only had to work
for seven months i had five months of vacation if i had wanted to i could have taken
the run to vietnam with a subsidiary shipping company and easily doubled my pay
instead of taking five months of vacation i had a great career ahead of me yet i
resigned after six months with the company and joined the marine corps to learn how to
fly my educated dad was devastated rich dad congratulated me in school and in the workplace
the popular opinion is the idea of specialization that is in order to make more money or get
promoted you need to specialize that is why medical doctors immediately begin to seek a
specialty such as orthopedics or pediatrics the same is true for accountants architects lawyers
pilots and others my educated dad believed in the same dogma that is why he was thrilled
when he eventually achieved his doctorate he often admitted that schools reward people who
study more and more about less and less rich dad encouraged me to do exactly the opposite you want
to know a little about a lot was his suggestion that is why for years i worked in
different areas of his companies for a while i worked in his accounting department
although i would probably never have been an accountant he wanted me to learn via osmosis rich
dad knew i would pick up jargon and a sense of what is important and what is not i also worked
as a busboy and construction worker as well as in sales reservations and marketing he was grooming
mike and me that is why he insisted we sit in on the meetings with his bankers lawyers accountants
and brokers he wanted us to know a little about every aspect of his empire when i quit my high
paying job with standard oil my educated dad had a heart-to-heart talk with me he was bewildered
he could not understand my decision to resign from a career that offered high pay great benefits
lots of time off and opportunity for promotion when he asked me one evening why did you quit i
could not explain it to him though i tried hard to my logic did not fit his logic the big problem
was that my logic was my rich dad's logic job security meant everything to my educated
dad learning meant everything to my rich dad educated dad thought i went to school to learn
to be a ship's officer rich dad knew that i went to school to study international trade so
as a student i made cargo runs navigating large freighters oil tankers and passenger
ships to the far east and the south pacific rich dad emphasized that i should stay in the
pacific instead of taking ships to europe because he knew that the emerging nations were in asia not
europe while most of my classmates including mike were partying at their fraternity houses i was
studying trade people business styles and cultures in japan taiwan thailand singapore hong kong
vietnam korea tahiti samoa and the philippines i was partying also but it was not in any
frat house i grew up rapidly educated dad just could not understand why i decided to quit
and join the marine corps i told him i wanted to learn to fly but really i wanted to learn to
lead troops rich dad explained to me that the hardest part of running a company is managing
people he had spent three years in the army my educated dad was draft exempt rich dad valued
learning to lead men into dangerous situations leadership is what you need to learn next he said
if you're not a good leader you'll get shot in the back just like they do in business returning
from vietnam in 1973 i resigned my commission even though i loved flying i found a job with
xerox corporation i joined it for one reason and it was not for the benefits i was a shy
person and the thought of selling was the most frightening subject in the world xerox has one
of the best sales trainings programs in america rich dad was proud of me my educated
dad was ashamed being an intellectual he thought that salespeople were below him i worked
with xerox for four years until i overcame my fear of knocking on doors and being rejected once i
could consistently be in the top five in sales i again resigned and moved on leaving behind
another great career with an excellent company in 1977 i formed my first company rich dad
had groomed mike and me to take over companies so i now had to learn to form them and put them
together my first product the nylon and velcro wallet was manufactured in the far east and
shipped to a warehouse in new york near where i had gone to school my formal education was
complete and it was time to test my wings if i failed i would go broke rich dad thought it
best to go broke before 30.
You still have time to recover was his advice on the eve of my 30th
birthday my first shipment left korea for new york today i still do business internationally and as
my rich dad encouraged me to do i keep seeking the emerging nations today my investment company
invests in south american countries and asian countries as well as in norway and russia there is
an old cliche that goes job is an acronym for just over broke unfortunately i would say that applies
to millions of people because school does not think financial intelligence is an intelligence
most workers live within their means they work and they pay bills there is another horrible
management theory that goes workers work hard enough to not be fired and owners pay just enough
so that workers won't quit and if you look at the pay scales of most companies again i would say
there is a degree of truth to that statement the net result is that most workers never get
ahead they do what they've been taught to do get a secure job most workers focus on working for pay
and benefits that reward them in the short term but are often disastrous in the long run instead
i recommend to young people to seek work for what they will learn more than what they will earn look
down the road at what skills they want to acquire before choosing a specific profession and
before getting trapped in the rat race once people are trapped in the lifelong process of
bill payne they become like those little hamsters running around in those metal wheels their
little furry legs are spinning furiously the wheel is turning furiously but come tomorrow
morning they'll still be in the same cage great job in the movie jerry maguire starring
tom cruise there are many great one-liners probably the most memorable is show me the money
but there is one line i thought most truthful it comes from the scene where tom cruise is
leaving the firm he has just been fired and he is asking the entire company who wants to come
with me and the whole place is silent and frozen only one woman speaks up and says i'd like to
but i'm due for a promotion in three months that statement is probably the most
truthful statement in the whole movie it is the type of statement that people use
to keep themselves busy working away to pay bills i know my educated dad looked forward to
his pay raise every year and every year he was disappointed so he would go back to school to earn
more qualifications so he could get another raise then once again there would be another
disappointment the question i often ask people is where is this daily activity taking you just
like the little hamster i wonder if people look at where their hard work is taking them what does
the future hold in his book the retirement myth craig s carpel writes i visited the headquarters
of a major national pension consulting firm and met with a managing director who specializes in
designing lush retirement plans for top management when i asked her what people who don't have
corner offices will be able to expect in the way of pension income she said with
a confident smile the silver bullet what i asked is the silver bullet she shrugged
and said if baby boomers discover they don't have enough money to live on when they're
older they can always blow their brains out carpel goes on to explain the difference between
the old defined benefit retirement plans and the new 401k plans that are riskier it is not a pretty
picture for most people working today and that is just for retirement add medical fees and long-term
nursing home care and the picture is frightening already many hospitals and countries
with socialized medicine need to make tough decisions such as who will live and
who will die they make those decisions purely on how much money they have and how old the
patients are if the patient is old they often will give the medical care to someone younger the older
poor patient gets put to the back of the line just as the rich can afford better education
the rich will be able to keep themselves alive while those who have little wealth will die so i
wonder are workers looking into the future or just until their next paycheck never questioning where
they are headed when i speak to adults who want to earn more money i always recommend the same
thing i suggest taking a long view of their life instead of simply working for the
money and security which i admit are important i suggest they take a second
job that will teach them a second skill often i recommend joining a network marketing
company also called multi-level marketing if they want to learn sales skills some of these companies
have excellent training programs that help people get over their fear of failure and rejection
which are the main reasons people are unsuccessful education is more valuable than money in the long
run when i offer this suggestion i often hear in response oh that is too much hassle or i only
want to do what i am interested in if they say it's too much of a hassle i ask so you
would rather work all your life giving 50 of what you earned to the government if they tell
me i only do what i am interested in i say i'm not interested in going to the gym but i go because i
want to feel better and live longer unfortunately there is some truth to the old statement you can't
teach an old dog new tricks unless a person is used to changing it's hard to change but for those
of you who might be on the fence when it comes to the idea of working to learn something new i offer
this word of encouragement life is much like going to the gym the most painful part is deciding to go
once you get past that it's easy there have been many days i have dreaded going to the gym but
once i am there and in motion it is a pleasure after the workout is over i am always glad i
talked myself into going if you are unwilling to work to learn something new and instead insist
on becoming highly specialized within your field make sure the company you work for is unionized
labor unions are designed to protect specialists my educated dad after falling from grace
with the governor became the head of the teachers union in hawaii he told me that it was
the hardest job he ever held my rich dad on the other hand spent his life doing his best to
keep his companies from becoming unionized he was successful although the unions came close
bridge dad was always able to fight them off personally i take no sides because i can see
the need for and the benefits of both sides if you do a school recommends become highly
specialized then seek union protection for example had i continued with my flying career i would
have sought a company that had a strong pilot's union why because my life would be dedicated to
learning a skill that was valuable in only one industry if i were pushed out of that industry my
life's skills would not be as valuable to another industry a displaced senior pilot with one hundred
thousand hours of heavy airline transport time earning one hundred fifty thousand dollars a year
would have a hard time finding an equivalent high paying job teaching in school skills do not
necessarily transfer from industry to industry skills the pilots are paid
for in the airline industry are not as important in say the school system
the same is true even for doctors today with all the changes in medicine many medical
specialists are needing to conform to medical organizations such as hmos school teachers
definitely need to be union members today in america the teachers union is the largest
and the richest labor union of all the nea the national education association has tremendous
political clout teachers need the protection of their union because their skills are also of
limited value to an industry outside of education so the rule of thumb is highly specialized
then unionize it's the smart thing to do when i ask the classes i teach how many of you
can cook a better hamburger than mcdonald's almost all the students raise their hands
i then ask so if most of you can cook a better hamburger how come mcdonald's makes more
money than you the answer is obvious mcdonald's is excellent at business systems the reason
so many talented people are poor is because they focus on building a better hamburger and
know little to nothing about business systems a friend of mine in hawaii is a great
artist he makes a sizable amount of money one day his mother's attorney called to tell him
that she had left him thirty five thousand dollars that is what was left of her estate after the
attorney and the government took their shares immediately he saw an opportunity to increase his
business by using some of this money to advertise two months later his first four-color full-page
ad appeared in an expensive magazine that targeted the very rich the ad ran for three
months he received no replies from the ad and all of his inheritance is now gone he now
wants to sue the magazine for misrepresentation this is a common case of someone who can build
a beautiful hamburger but knows little about business when i asked him what he learned his
only reply was advertising salespeople are crooks i then asked him if he would be willing to take a
course in sales and a course in direct marketing his reply i don't have the time
and i don't want to waste my money the world is filled with talented poor people all
too often they're poor or struggle financially or earn less than they are capable of not
because of what they know but because of what they do not know they focus on perfecting
their skills and building a better hamburger rather than the skills of selling and delivering
the hamburger maybe mcdonald's does not make the best hamburger but they are the best at
selling and delivering a basic average burger poor dad wanted me to specialize that
was his view on how to be paid more even after being told by the governor of hawaii
that he could no longer work in state government my educated dad continued to encourage me to get
specialized educated dad then took up the cause of the teachers union campaigning for further
protection and benefits for these highly skilled and educated professionals we argued often but i
know he never agreed that over-specialization is what caused the need for union protection he never
understood that the more specialized you become the more you are trapped and dependent
on that specialty rich dad advised that mike and i groom ourselves many corporations do
the same thing they find a young bright student just out of business school and begin grooming
that person to someday take over the company so these bright young employees do not
specialize in one department they are moved from department to department to learn
all the aspects of business systems the rich often groom their children or the children of
others by doing so their children gain an overall knowledge of the operations of the business
and how the various departments interrelate for the world war ii generation it was considered
bad to skip from company to company today it is considered smart since people will
skip from company to company rather than seek greater specialization and skills
why not seek to learn more than to earn in the short term it may earn you less
but it will pay dividends in the long term the main management skills needed for success
are one management of cash flow two management of systems three management of people the most
important specialized skills are sales and marketing the ability to sell to communicate to
another human being be it a customer employee boss spouse or child is the base skill of personal
success communication skills such as writing speaking and negotiating are crucial to a life
of success these are skills i work on constantly attending courses or buying educational resources
to expand my knowledge as i have mentioned my educated dad worked harder and harder the more
competent he became he also became more trapped the more specialized he got although his salary
went up his choices diminished soon after he was locked out of government work he found out
how vulnerable he really was professionally it is like professional athletes who suddenly are
injured or too old to play their once high paying position is gone and they have limited skills
to fall back on i think that is why my educated dad sided so much with the unions after that he
realized how much a union would have benefited him rich dad encouraged mike and me to know
a little about a lot he encouraged us to work with people smarter than we were and to
bring smart people together to work as a team today it would be called a synergy of professional
specialties today i meet ex-school teachers earning hundreds of thousands of dollars a year
they earn that much because they have specialized skills in their field as well as other skills
they can teach as well as sell and market i know of no other skills to be more important than
selling and marketing the skills of selling and marketing are difficult for most people primarily
due to their fear of rejection the better you are at communicating negotiating and handling your
fear of rejection the easier life is just as i advise that newspaper writer who wanted to become
a best-selling author i advise anyone else today being technically specialized has its
strengths as well as its weaknesses i have friends who are geniuses but they cannot
communicate effectively with other human beings and as a result their earnings are pitiful i
advise them to just spend a year learning to sell even if they are nothing their communication
skills will improve and that is priceless in addition to being good learners sellers
and marketers we need to be good teachers as well as good students to be truly rich we
need to be able to give as well as to receive in cases of financial or professional struggle
there is often a lack of giving and receiving i know many people who are poor because they are
neither good students nor good teachers both of my dads were generous men both made it a practice
to give first teaching was one of their ways of giving the more they gave the more they received
one glaring difference was in the giving of money my rich dad gave lots of money away he gave to his
church to charities and to his foundation he knew that to receive money you had to give money giving
money is the secret to most great wealthy families that is why there are organizations like the
rockefeller foundation and the ford foundation these are organizations designed to take their
wealth and increase it as well as give it away in perpetuity my educated dad always said when i have
some extra money i'll give it the problem was that there was never any extra so he worked harder to
draw more money in rather than focus on the most important law of money give and you shall receive
instead he believed in receive and then you give in conclusion i became both dads one part
of me is a hardcore capitalist who loves the game of money making money the other part
is a socially responsible teacher who is deeply concerned with this ever-widening
gap between the haves and have-nots i personally hold the archaic educational system
primarily responsible for this growing gap chapter 7 overcoming obstacles the primary difference between a rich person
and a poor person is how they manage fear once people have studied and become financially
literate they may still face roadblocks to becoming financially independent there are
five main reasons why financially literate people may still not develop abundant asset
columns that could produce a large cash flow the five reasons are one fear two cynicism
three laziness four bad habits five arrogance overcoming fear i have never met
anyone who really likes losing money and in all my years i have never met a rich person
who has never lost money but i have met a lot of poor people who have never lost a dime investing
that is the fear of losing money is real everyone has it even the rich but it's not having fear
that is the problem it's how you handle fear it's how you handle losing it's how you handle
failure that makes the difference in one's life the primary difference between a rich person and
a poor person is how they manage that fear it's okay to be fearful it's okay to be a coward
when it comes to money you can still be rich we're all heroes at something
and cowards had something else my friend's wife is an emergency room nurse
when she sees blood she flies into action when i mention investing she runs away
when i see blood i don't run i pass out my rich dad understood phobias about money some
people are terrified of snakes some people are terrified about losing money both are phobias he
would say so his solution to the phobia of losing money was this little rhyme if you hate risk and
worry start early if you start young it's easier to be rich i won't go into it here but there is a
staggering difference between a person who starts investing at age 20 versus age 30.
The purchase of
manhattan island is said to be one of the greatest bargains of all time new york was purchased
for twenty four dollars in trinkets and beads yet if that twenty four dollars had been invested
at eight percent annually that twenty four dollars would have been worth more than twenty
eight trillion dollars by nineteen ninety five manhattan could be repurchased with money left
over to buy much of los angeles but what if you don't have much time left or would like to retire
early how do you handle the fear of losing money my poor dad did nothing he simply avoided the
issue refusing to discuss the subject my rich dad on the other hand recommended that i think like
a texan i like texas and texans he used to say in texas everything is bigger when texans
win they win big and when they lose it's spectacular they like losing i asked that's
not what i'm saying nobody likes losing show me a happy loser and i'll show you a loser
said rich dad it's a texan's attitude toward risk reward and failure i'm talking about it's how
they handle life they live it big not like most of the people around here living like roaches
when it comes to money terrified that someone will shine a light on them and whimpering when
the grocery clerk shortchanges them a quarter rich dad went on what i like best is the
texas attitude they're proud when they win and they brag when they lose texans
have a saying if you're going to go broke go big you don't want to admit you went broke
over a duplex he constantly told mike and me that the greatest reason for lack of financial
success was because most people played it too safe people are so afraid of losing that
they lose were his words fran tarkenton a one-time great nfl quarterback says it's still
another way winning means being unafraid to lose in my own life i've noticed that winning usually
follows losing before i finally learned to ride a bike i first fell down many times i've never
met a golfer who has never lost a golf ball i've never met people who have fallen in
love who have never had their heart broken and i've never met someone rich who has never lost
money so for most people the reason they don't win financially is because the pain of losing
money is far greater than the joy of being rich another saying in texas is everyone wants to go
to heaven but no one wants to die most people dream of being rich but are terrified of
losing money so they never get to heaven rich dad used to tell mike and me
stories about his trips to texas if you really want to learn the attitude of how to
handle risk losing and failure go to san antonio and visit the alamo the alamo is a great
story of brave people who chose to fight knowing there was no hope of success they chose
to die instead of surrendering it's an inspiring story worthy of study nonetheless it's still a
tragic military defeat they got their butts kicked so how did texans handle failure
they still shout remember the alamo mike and i heard this story a lot he always told
us this story when he was about to go into a big deal and he was nervous after he had done all his
due diligence and it was time to put up or shut up he told us this story every time he was afraid
of making a mistake or losing money he told us this story it gave him strength for it reminded
him that he could always turn a financial loss into a financial win rich dad knew that failure
would only make him stronger and smarter it's not that he wanted to lose he just knew who
he was and how he would take a loss he would take a loss and make it a win that's what made him a
winner and others losers it gave him the courage to cross the line when others backed out that's
why i like texans so much he would say they took a great failure and turned it into inspiration
as well as a tourist destination that makes them millions but probably his words that mean the
most to me today are these texans don't bury their failures they get inspired by them they take
their failures and turn them into rallying cries failure inspires texans to become winners but
that formula is not just the formula for texans it is the formula for all winners i've said that
falling off my bike was part of learning to ride i remember falling off only made me more
determined to learn to ride not less i also said that i have never met a golfer who has never lost
a ball for top professional golfers losing a ball or a tournament provides the inspiration to be
better to practice harder to study more that's what makes them better for winners losing
inspires them for losers losing defeats them i like to quote john d rockefeller who said
i always tried to turn every disaster into an opportunity and being japanese-american i can
say this many people say that pearl harbor was an american mistake i say it was a japanese mistake
from the movie torah torah torah a somber japanese admiral says to his cheering subordinates i
am afraid we have awakened a sleeping giant remember pearl harbor became a rallying cry it
turned one of america's greatest losses into the reason to win this great defeat gave america
strength and america soon emerged as a world power failure inspires winners and failure defeats
losers it is the biggest secret of winners it's the secret that losers do not know the greatest
secret of winners is that failure inspires winning thus they're not afraid of losing repeating fran
tarkenton's quote winning means being unafraid to lose people like fran tarkenton are not
afraid of losing because they know who they are they hate losing so they know that losing will
only inspire them to become better there is a big difference between hating losing and being
afraid to lose most people are so afraid of losing money that they lose they go broke over a duplex
financially they play life too safe and too small they buy big houses and big cars but not big
investments the main reason that over ninety percent of the american public struggles
financially is because they play not to lose they don't play to win they go to their
financial planners or accountants or stock brokers and buy a balanced portfolio most have lots of
cash and cds low yield bonds mutual funds that can be traded within a mutual fund family and a
few individual stocks it is a safe and sensible portfolio but it is not a winning portfolio it
is a portfolio of someone playing not to lose don't get me wrong it's probably a better
portfolio than more than 70 percent of the population has and that's frightening it's a great
portfolio for someone who loves safety but playing it safe and balanced on your investment portfolio
is not the way successful investors play the game if you have little money and you want to be
rich you must first be focused not balanced if you look at any successful person at the start
they were not balanced balanced people go nowhere they stay in one spot to make progress you must
first go unbalanced just look at how you make progress walking thomas edison was not balanced
he was focused bill gates was not balanced he was focused donald trump is focused george
soros is focused george patton did not take his tanks wide he focused them and blew through
the weak spots in the german line the french went wide with the maginot line and you know what
happened to them if you have any desire to be rich you must focus do not do what poor and middle
class people do put their few eggs in many baskets put a lot of your eggs in a few baskets and
focus follow one course until successful if you hate losing play it safe if losing makes
you weak play it safe go with balanced investments if you're over 25 years old and are terrified
of taking risks don't change play it safe but start early start accumulating your
nest egg early because it will take time but if you have dreams of freedom of getting
out of the rat race the first question to ask yourself is how do i respond to failure if
failure inspires you to win maybe you should go for it but only maybe if failure makes you
weak or causes you to throw temper tantrums like spoiled brats who call attorneys to file
lawsuits every time something doesn't go their way then play it safe keep your daytime job or buy
bonds or mutual funds but remember there is risk in those financial instruments also even though
they may appear safe i say all this mentioning texas and fran tarkinton because stacking the
asset column is easy it's really a low aptitude game it doesn't take much education fifth grade
math will do but building your asset column is a game in which attitude plays a major role it takes
guts patience and a great attitude toward failure losers avoid failing and failure turns
losers into winners just remember the alamo overcoming cynicism the sky
is falling the sky is falling most of us know the story of chicken little who
ran around warning the barnyard of impending doom we all know people who are that way there's a
chicken little inside each of us as i stated earlier the cynic is really a little chicken we
all got a little chicken when fear and doubt cloud our thoughts all of us have doubts i'm not smart
i'm not good enough so and so is better than me our doubts often paralyze us we play the what if
game what if the economy crashes right after i invest what if i lose control and i can't pay the
money back what if things don't go as i planned or we have friends or loved ones who will
remind us of our shortcomings they often say what makes you think you can do that if it's
such a good idea how come someone else hasn't done it that will never work you don't know
what you're talking about these words of doubt often get so loud that we fail to act a
horrible feeling builds in our stomach sometimes we can't sleep we fail to move forward so we stay
with what is safe and opportunities pass us by we watch life passing by as we sit immobilized
with a cold knot in our body we have all felt this at one time in our lives some more than others
peter lynch of fidelity magellan mutual fund fame refers to warnings about the sky falling as noise
and we all hear it noise is either created inside our heads or comes from outside often from friends
family co-workers and the media lynch recalls the time during the 1950s when the threat of nuclear
war was so prevalent in the news that people began building fallout shelters and storing food and
water if they had invested that money wisely in the market instead of building a fallout shelter
they'd probably be financially independent today when violence breaks out in a city
gun sales go up all over the country a person dies from rare hamburger meat in
the state of washington and the arizona health department orders restaurants to have all
beef cooked well done a drug company runs a tv commercial in february showing people catching the
flu colds go up as well as sales of cold medicine most people are poor because when
it comes to investing the world is filled with chicken littles running around
yelling the sky is falling the sky is falling and chicken littles are effective because
every one of us is a little chicken it often takes great courage to not let rumors and talk of
doom and gloom affect your doubts and fears but a savvy investor knows that the seemingly worst of
times is actually the best of times to make money when everyone else is too afraid to act they
pull the trigger and are rewarded some time ago a friend named richard came from boston to visit
kim and me in phoenix he was impressed with what we had done through stocks and real estate the
phoenix real estate prices were depressed we spent two days showing him what we thought
were excellent opportunities for cash flow and capital appreciation kim and i are not
real estate agents we are strictly investors after identifying a unit in a resort community we
called an agent who sold it to him that afternoon the price was a mere 42 thousand dollars for a
two-bedroom townhome similar units were going for sixty five thousand dollars he had found a bargain
excited he bought it and returned to boston two weeks later the agent called to say that our
friend had backed out i called immediately to find out why all he said was that he talked to his
neighbor and his neighbor told him it was a bad deal he was paying too much i asked richard if
his neighbor was an investor richard said he was not when i asked why he listened to him richard
got defensive and simply said he wanted to keep looking the real estate market in phoenix turned
and a few years later that little unit was renting for one thousand dollars a month two thousand
five hundred dollars in the peak winter months the unit was worth ninety five thousand dollars all
richard had to put down was five thousand dollars and he would have had a start at getting out
of the rat race today he still has done nothing richard's backing out did not surprise me it's
called buyer's remorse and it affects all of us the little chicken won and a chance at freedom
was lost in another example i hold a small portion of my assets in tax lien certificates instead of
cds i earn 16 percent per year on my money which certainly beats the interest rates banks offer on
cds the certificates are secured by real estate and enforced by state law which is also better
than most banks the formula they're bought on makes them safe they just lack liquidity
so i look at them as two to seven year cds almost every time i tell someone that i hold
my money this way especially if they have money in cds they will tell me it's risky
they tell me why i should not do it when i ask them where they get their information they
say from a friend or an investment magazine they've never done it and they're telling
someone who's doing it why they shouldn't the lowest yield i look for is 16 but people who
are filled with doubt are willing to accept a far lower return doubt is expensive my point is
that it's those doubts and cynicism that keep most people poor and playing it safe the real
world is simply waiting for you to get rich only a person's doubts keep them poor as i said
getting out of the rat race is technically easy it doesn't take much education but those doubts
are cripplers for most people cynics never win said rich dad unchecked doubt and fear creates
a cynic cynics criticize and winners analyze was another of his favorite sayings rich dad
explained that criticism blinded while analysis opened eyes analysis allowed winners to see the
critics were blind and to see opportunities that everyone else missed and finding what people miss
is key to any success real estate is a powerful investment tool for anyone seeking financial
independence or freedom it is a unique investment tool yet every time i mention real estate as a
vehicle i often hear i don't want to fix toilets that's what peter lynch calls noise that's what
my rich dad would say is the cynic talking someone who criticizes and does not analyze someone who
lets their doubts and fears close their mind instead of open their eyes so when someone says
i don't want to fix toilets i want to fire back what makes you think i want to they're saying
a toilet is more important than what they want i talk about freedom from the rat race and they
focus on toilets that is the thought pattern that keeps most people poor they criticize instead of
analyze i don't once hold the key to your success rich dad would say because i too do not want to
fix toilets i shop hard for a property manager who does fix toilets and by finding a great
property manager who runs houses or apartments well my cash flow goes up but more importantly a
great property manager allows me to buy a lot more real estate since i don't have to fix toilets a
great property manager is key to success in real estate finding a good manager is more important to
me than the real estate a great property manager often hears of great deals before real estate
agents do which makes them even more valuable that is what rich dad meant by i don't once hold
the key to your success because i do not want to fix toilets either i figured out how to buy
more real estate and expedite my getting out of the rat race the people who continue to say i
don't want to fix toilets often deny themselves the use of this powerful investment vehicle
toilets are more important than their freedom in the stock market i often hear people say i
don't want to lose money well what makes them think i or anyone else likes losing money they
don't make money because they choose to not lose money instead of analyzing they close their
minds to another powerful investment vehicle the stock market i was riding with a friend
past our neighborhood gas station he looked up and saw that the price of gas was going up and
thus the price of oil my friend is a worrywart or a chicken little to him the sky is always going to
fall and it usually does on him when we got home he showed me all the stats as to why the price
of oil was going to go up over the next few years statistics i had never seen before even though i
already owned substantial shares of an existing oil company with that information i immediately
began looking for and found a new undervalued oil company that was about to find some oil deposits
my broker was excited about this new company and i bought 15 000 shares for 65 cents per share
three months later this same friend and i drove by the same gas station and sure enough the price
per gallon had gone up nearly 15 percent again the chicken little worried and complained i smiled
because a month earlier that little oil company hit oil and those fifteen thousand shares went
up to more than three dollars per share since he had first given me the tip and the price of gas
will continue to go up if what my friend says is true if most people understood how a stop
worked in stock market investing there would be more people investing to win instead of investing
not to lose a stop is simply a computer command that sells your stock automatically if the price
begins to drop helping to minimize your losses and maximize some gains it's a great tool for
those who are terrified of losing so whenever i hear people focusing on their i don't wants rather
than what they do want i know the noise in their head must be loud chicken little has taken over
their brain and is yelling the sky is falling and toilets are breaking so they avoid their don't
wants but they pay a huge price they may never get what they want in life instead of analyzing
their inner chicken little closes their mind rich dad gave me a way of looking at chicken
little just do what colonel sanders did at the age of 66 he lost his business and began to live on
his social security check it wasn't enough he went around the country selling his recipe for fried
chicken he was turned down one thousand nine times before someone said yes and he went on to become
a multi-millionaire at an age when most people are quitting he was a brave and tenacious man rich
dad said of harlan sanders so when you're in doubt and feeling a little afraid just do what colonel
sanders did to his little chicken he fried it overcoming laziness busy people are often the most
lazy we have all heard stories of a businessman who works hard to earn money he works hard to
be a good provider for his wife and children he spends long hours at the office and brings work
home on weekends one day he comes home to an empty house his wife has left with the kids he knew he
and his wife had problems but rather than work to make the relationship strong he stayed busy
at work dismayed his performance at work slips and he loses his job today i often meet people
who are too busy to take care of their wealth and there are people too busy to take care of
their health the cause is the same they're busy and they stay busy as a way of avoiding something
they do not want to face nobody has to tell them deep down they know in fact if you remind them
they often respond with anger or irritation if they aren't busy at work or with
the kids they're often busy watching tv fishing playing golf or shopping yet deep down
they know they are avoiding something important that's the most common form of laziness laziness
by staying busy so what is the cure for laziness the answer is a little greed for many of us we
were raised thinking of greed or desire as bad greedy people are bad people my mom used to say
yet we all have inside of us this yearning to have nice new or exciting things so to keep that
emotion of desire under control often parents find ways of suppressing that desire with guilt you
only think about yourself don't you know you have brothers and sisters was one of my mom's favorites
you want me to buy you what was a favorite of my dad do you think we're made of money do you
think money grows on trees we're not rich people you know it wasn't so much the words but the angry
guilt trip that went with the words that got to me or the reverse guilt trip was the i'm sacrificing
my life to buy this for you i'm buying this for you because i never had this advantage when i
was a kid i have a neighbor who is stone broke but can't park his car in his garage the garage is
filled with toys for his kids those spoiled brats get everything they ask for i don't want them to
know the feeling of want are his everyday words he has nothing set aside for their college or his
retirement but his kids have every toy ever made he recently got a new credit card on the mail
and took his kids to visit las vegas i'm doing it for the kids he said with great sacrifice
rich dad forbade the words i can't afford it in my real home that's all i heard instead rich dad
required his children to say how can i afford it he believed that the words i can't afford it shut
down your brain it didn't have to think anymore how can i afford it opened up the brain and
forced it to think and search for answers but most importantly he felt the words i can't
afford it were a lie and the human spirit knows it the human spirit is very very powerful he
would say it knows it can do anything by having a lazy mind that says i can't
afford it a war breaks out inside you your spirit is angry and your lazy mind must
defend its lie the spirit is screaming come on let's go to the gym and work out and the lazy
mind says but i'm tired i worked really hard today or the human spirit says i'm sick and tired of
being poor let's get out there and get rich to which the lazy mind says rich people are greedy
besides it's too much bother it's not safe i might lose money i'm working hard enough as
it is i've got too much to do at work anyway look at what i have to do tonight my boss wants it
finished by morning i can't afford it also causes sadness a helplessness that leads to despondency
and often depression how can i afford it opens up possibilities excitement and dreams so rich dad
was not so concerned about what we wanted to buy as long as we understood that how can i afford
it creates a stronger mind and a dynamic spirit thus he rarely gave mike or me anything
he would instead ask how can you afford it and that included college which we paid for
ourselves it was not the goal but the process of attaining the goal that he wanted us to learn the
problem i see today is that there are millions of people who feel guilty about their desire or their
greed it's old conditioning from their childhood while they desire to have the finer things
that life offers most have been conditioned subconsciously to say i can't have that
or i'll never be able to afford that when i decided to exit the rat race it was simply
a question of how can i afford to never work again and my mind began to kick out answers and
solutions the hardest part was fighting my real parents dogma we can't afford that stop
thinking only about yourself why don't you think about others and other similar sentiments
designed to instill guilt to suppress my greed so how do you beat laziness once again the
answer is a little greed it's that radio station wiifm which stands for what's in it for me a
person needs to sit down and ask what would my life be like if i never had to work again what
would i do if i had all the money i needed without that little greed the desire to have something
better progress is not made our world progresses because we all desire a better life new inventions
are made because we desire something better we go to school and study hard because we want something
better so whenever you find yourself avoiding something you know you should be doing then the
only thing to ask yourself is what's in it for me be a little greedy it's the best cure for laziness
too much greed however as anything in excess can be is not good but just remember what michael
douglas said in the movie wall street greed is good rich dad said it differently guilt is worse
than greed for guilt robs the body of its soul i think eleanor roosevelt said it best do
what you feel in your heart to be right for you'll be criticized anyway you'll be
damned if you do and damned if you don't overcoming bad habits our lives are a reflection
of our habits more than our education after seeing the movie conan the barbarian starring arnold
schwarzenegger a friend said i'd love to have a body like schwarzenegger most of the guys nodded
in agreement i even heard he was really puny and skinny at one time another friend added yeah i
heard that too another one said i heard he has a habit of working out almost every day in the gym
yeah i'll bet he has to now said the group cynic i'll bet he was born that way besides let's
stop talking about arnold and get some beers this is an example of habits controlling behavior
i remember asking my rich dad about the habits of the rich instead of answering me outright he
wanted me to learn through example as usual when does your dad pay his bills rich dad asked the
first of the month i said does he have anything left over he asked very little i said that's the
main reason he struggles said rich dad he has bad habits your dad pays everyone else first he pays
himself last but only if he has anything left over which he usually doesn't i said but he has
to pay his bills doesn't he you're saying he shouldn't pay his bills of course not said rich
dad i firmly believe in paying my bills on time i just pay myself first before i pay even the
government but what happens if you don't have enough money i asked what do you do then the
same said rich dad i still pay myself first even if i'm short of money my asset column is
far more important to me than the government but i said don't they come after you
yes if you don't pay said rich dad look i did not say not to pay i just said i
pay myself first even if i'm short of money but i replied how do you do that it's not how the
question is why rich dad said okay why motivation said rich dad who do you think will complain
louder if i don't pay them me or my creditors your creditors will definitely scream louder than
you i said responding to the obvious you wouldn't say anything if you didn't pay yourself so you see
after paying myself the pressure to pay my taxes and the other creditors is so great that it forces
me to seek other forms of income the pressure to pay becomes my motivation i've worked extra jobs
started other companies traded in the stock market anything just to make sure those guys don't start
yelling at me that pressure made me work harder forced me to think and all in all made me smarter
and more active when it comes to money if i had paid myself last i would have felt no pressure
but i'd be broke so it is the fear of the government or other people you owe money to that
motivates you that's right said rich dad you see government bill collectors are big bullies so
are bill collectors in general most people give in to those bullies they pay them and never pay
themselves you know the story of the 98 pound weakling who gets sand kicked in his face i nodded
i see that ad for weight lifting and bodybuilding lessons in the comic books all the time well most
people let the bullies kick sand in their faces i decided to use the fear of the bully to make
me stronger others got weaker forcing myself to think about how to make extra money is like
going to the gym and working out with weights the more i work my mental money muscles out the
stronger i get now i'm not afraid of those bullies i liked what rich dad was saying so if i
pay myself first i get financially stronger mentally and fiscally rich dad nodded and if i
pay myself last or not at all i get weaker so people like bosses managers tax collectors bill
collectors and landlords push me around all my life just because i don't have good money habits
rich dad nodded just like the 98 pound weakling overcoming arrogance what i know makes
me money what i don't know loses me money every time i have been arrogant i have lost money
because when i'm arrogant i truly believe that what i don't know is not important rich dad
would often tell me i have found that many people use arrogance to try to hide their own
ignorance it often happens when i am discussing financial statements with accountants or even
other investors they try to bluster their way through the discussion it is clear to me that they
don't know what they're talking about they're not lying but they are not telling the truth there
are many people in the world of money finances and investments who have absolutely no idea what
they're talking about most people in the money industry are just spouting off sales pitches like
used car salesmen when you know you are ignorant in a subject start educating yourself by finding
an expert in the field or a book on the subject chapter 8 getting started there is gold
everywhere most people are not trained to see it i wish i could say acquiring wealth was easy for
me but it wasn't so in response to the question how do i start i offer the thought process i
go through on a day-to-day basis it really is easy to find great deals i promise you that it's
just like riding a bike after a little wobbling it's a piece of cake but when it comes to money
it takes determination to get through the wobbling that's a personal thing to find million
dollar deals of a lifetime requires us to call on our financial genius i believe that
each of us has a financial genius within us the problem is that our financial genius lies
asleep waiting to be called upon it lies asleep because our culture has educated us into believing
that the love of money is the root of all evil it has encouraged us to learn a profession so we
can work for money but failed to teach us how to have money work for us it taught us not to worry
about our financial future because our company or the government would take care of us when our
working days are over however it is our children educated in the same school system who will end up
paying for this absence of financial education the message is still to work hard earn money and spend
it and when we run short we can always borrow more unfortunately ninety percent of the western world
subscribes to the above dogma simply because it's easier to find a job and work for money if you are
not one of the masses i offer you the following 10 steps to awaken your financial genius i simply
offer you the steps i have personally followed if you want to follow some
of them great if you don't make up your own your financial genius is smart
enough to develop its own list while in peru i asked a gold miner of 45 years how he was so
confident about finding a gold mine he replied there is gold everywhere most people are not
trained to see it and i would say that is true in real estate i can go out and in a day come
up with four or five great potential deals while the average person will go out and find nothing
even looking in the same neighborhood the reason is that they have not taken the time to develop
their financial genius i offer you the following 10 steps as a process to develop your god-given
powers powers over which only you have control one find a reason greater than reality the
power of spirit if you ask most people if they would like to be rich or financially free
they would say yes but then reality sets in the road seems too long with too many hills
to climb it's easier to just work for money and hand the excess over to your broker i once
met a young woman who had dreams of swimming for the us olympic team the reality was that she
had to get up every morning at four o'clock to swim for three hours before going to
school she did not party with her friends on saturday night she had to study and
keep her grades up just like everyone else when i asked her what fueled her superhuman
ambition and sacrifice she simply said i do it for myself and the people i love it's
love that gets me over the hurdles and sacrifices a reason or a purpose is a combination of wants
and don't wants when people ask me what my reason for wanting to be rich is i tell them that it is
a combination of deep emotional wants and don't wants i will list a few first the don't wants for
they create the wants i don't want to work all my life i don't want what my parents aspired for
which was job security and a house in the suburbs i don't like being an employee i hated that my dad
always missed my football games because he was so busy working on his career i hated it when my dad
worked hard all his life and the government took most of what he worked for at his death he could
not even pass on what he worked so hard for when he died the rich don't do that they work hard and
pass it on to their children now the once i want to be free to travel the world and live in the
lifestyle i love i want to be young when i do this i want to simply be free i want control over
my time and my life i want money to work for me those are my deep-seated emotional reasons what
are yours if they are not strong enough then the reality of the road ahead may be greater than your
reasons i have lost money and been set back many times but it was the deep emotional reasons that
kept me standing up and going forward i wanted to be free by age 40 but it took me until i was
47 with many learning experiences along the way as i said i wish i could say it was easy
it wasn't but it wasn't that hard either i've learned that without a strong reason
or purpose anything in life is hard if you do not have a strong
reason there is no sense listening further it will sound like too much work two make daily choices the power of choice
choice is the main reason people want to live in a free country we want the power to
choose financially with every dollar we get in our hands we hold the power to choose
our future to be rich poor or middle class our spending habits reflect who we are poor
people simply have poor spending habits the benefit i had as a boy was that
i loved playing monopoly constantly nobody told me monopoly was only for kids so
i just kept playing the game as an adult i also had a rich dad who pointed out to me the
difference between an asset and a liability so a long time ago as a little boy i chose to be
rich and i knew that all i had to do was learn to acquire assets real assets my best friend
mike had an asset column handed to him but he still had to choose to learn to keep it many rich
families lose their assets in the next generation simply because there was no one trained
to be a good steward over their assets most people choose not to be rich for ninety
percent of the population being rich is too much of a hassle so they invent sayings that go
i'm not interested in money i'll never be rich i don't have to worry i'm still young when i make
some money then i'll think about my future my husband or wife handles the finances the problem
with those statements is that they rob the person who chooses to think such thoughts of two things
one is time which is your most precious asset the second is learning having no money should not be
an excuse to not learn but that is a choice we all make daily the choice of what we do with our time
our money and what we put in our heads that is the power of choice all of us have choice i just
choose to be rich and i make that choice every day invest first in education in reality the only real
asset you have is your mind the most powerful tool we have dominion over each of us has the choice of
what we put in our brain once we're old enough you can watch tv read golf magazines or go to ceramics
class or a class on financial planning you choose most people simply buy investments rather than
first investing in learning about investing a friend of mine recently had her apartment
burglarized the thieves took her electronics and left all the books and we all have that same
choice 90 percent of the population buys tv sets and only about 10 percent buy business books
so what do i do i go to seminars i like it when they are at least two days long because i like to
immerse myself in a subject in 1973 i was watching this guy on tv who was advertising a three-day
seminar on how to buy real estate for nothing down i spent 385 dollars and that course has made me
at least two million dollars if not more but more importantly it bought me life i don't have to work
for the rest of my life because of that one course i go to at least two such courses every year i
love cds and audio books the reason i can easily review what i just heard i was listening to an
investor say something i completely disagreed with instead of becoming arrogant and critical i simply
listened to that five-minute stretch at least twenty times maybe more but suddenly by keeping my
mind open i understood why he said what he said it was like magic i felt like i had a window into the
mind of one of the greatest investors of our time i gained tremendous insight into the vast
resources of his education and experience the net result i still have the old way i used
to think and i now have a new way of looking at the same problem or situation i have two ways to
analyze a problem or trend and that is priceless today i often say how would donald trump do this
or warren buffett or george soros the only way i can access their vast mental power is to be humble
enough to read or listen to what they have to say arrogant or critical people are often people with
low self-esteem who are afraid of taking risks that's because if you learn something new you are
then required to make mistakes in order to fully understand what you have learned if you have
listened this far arrogance is not one of your problems arrogant people rarely read or listen to
experts why should they they are the center of the universe there are so many intelligent people who
argue or defend when a new idea clashes with the way they think in this case their so-called
intelligence combined with arrogance equals ignorance each of us knows people who are highly
educated or believe they are smart but their balance sheet pains a different picture a truly
intelligent person welcomes new ideas for new ideas can add to the synergy of other accumulated
ideas listening is more important than talking if that were not true god would not have given us
two ears and only one mouth too many people think with their mouth instead of listening in order
to absorb new ideas and possibilities they argue instead of asking questions i take a long view on
my wealth i do not subscribe to the get rich quick mentality most lottery players or casino gamblers
have i may go in and out of stocks but i am long on education if you want to fly an airplane i
advise taking lessons first i am always shocked at people who buy stocks or real estate but
never invest in their greatest asset their mind just because you bought a house or two
does not make you an expert at real estate three choose friends carefully
the power of association first of all i do not choose my friends by
their financial statements i have friends who have actually taken a vow of poverty as
well as friends who earn millions every year the point is that i learn from all of them now i
will admit that there are people i have actually sought out because they had money but i was not
after their money i was seeking their knowledge in some cases these people who had money
have become dear friends i've noticed that my friends with money talk about money they don't
do it to brag they're interested in the subject so i learn from them and they learn from me my
friends who are in dire financial straits do not like talking about money business or investing
they often think it rude or unintellectual so i also learned from my friends who
struggle financially i find out what not to do i have several friends who have generated over a
billion dollars in their short lifetimes the three of them report the same phenomenon their friends
who have no money have never come to them to ask them how they did it but they do come asking
for one of two things or both a loan or a job warning don't listen to poor or frightened people
i have such friends and while i love them dearly they are the chicken littles of life to them when
it comes to money especially investments it's always the sky is falling the sky is falling
they can always tell you why something won't work the problem is that people listen to them
but people who blindly accept doom and gloom information are also chicken littles as that old
saying goes birds of a feather flock together if you watch business channels on tv they
often have a panel of so-called experts one expert will say the market is going to
crash and the other will say it's going to boom if you're smart you listen to both keep your
mind open because both have valid points unfortunately most poor people listen to chicken
little i have had many close friends try to talk me out of a deal or an investment not long ago a
friend told me he was excited because he found a six percent certificate of deposit i told him i
earned sixteen percent from the state government the next day he sent me an article about why my
investment was dangerous i have received sixteen percent for years now and he still receives six
percent i would say that one of the hardest things about wealth building is to be true to yourself
and to be willing to not go along with the crowd this is because in the market it is usually the
crowd that shows up late that is slaughtered if a great deal is on the front
page it's too late in most instances look for a new deal as we used to say as surfers
there is always another wave people who hurry and catch a wave late usually are the ones
who wipe out smart investors don't time the markets if they miss a wave they search for
the next one and get themselves in position this is hard for most investors because buying
what is not popular is frightening timid investors are like sheep going along with the crowd or
their greed gets them in when wise investors have already taken their profits and moved on
wise investors buy an investment when it's not popular they know their profits are made when
they buy not when they sell they wait patiently as i said they do not time the market just like a
surfer they get in position for the next big swell it's all insider trading there are forms
of insider trading that are illegal and there are forms of insider trading that
are legal but either way it's insider trading the only distinction is how far
away from the inside are you the reason you want to have rich friends is
because that is where the money is made it's made on information you want to hear about the
next boom get in and get out before the next bust i'm not saying do it illegally but the sooner you
know the better your chances are for profits with minimal risk that is what friends are
for and that is financial intelligence four master a formula and then learn a
new one the power of learning quickly in order to make bread every baker follows a
recipe even if it's only held in their head the same is true for making money most of us have
heard the saying you are what you eat i have a different slant i say you become what you study in
other words be careful what you learn because your mind is so powerful that you become what you put
in your head for example if you study cooking you then tend to cook if you don't want to be a cook
anymore then you need to study something else when it comes to money the masses generally have one
basic formula they learned in school and it's this work for money the predominant formula i see in
the world is that every day millions of people get up go to work earn money pay bills balance
checkbooks buy some mutual funds and go back to work that is the basic formula or recipe if
you're tired of what you're doing or you're not making enough it's simply a case of changing
the formula via which you make money years ago when i was 26 i took a weekend class called how to
buy real estate foreclosures i learned a formula the next trick was to have the discipline to
actually put into action what i had learned that is where most people stop for three years while
working for xerox i spent my spare time learning to master the art of buying foreclosures i've
made several million dollars using that formula so after i mastered that formula i went in
search of other formulas for many of the classes i did not directly use the information i learned
but i always learned something new i have attended classes designed for derivative traders commodity
option traders and chaologists i was way out of my league being in a room full of people with
doctorates in nuclear physics and space science yet i learned a lot that made my stock and real
estate investing more meaningful and lucrative most junior colleges and community colleges
have classes on financial planning and buying traditional investments they are good places to
start but i always search for faster formula that is why on a fairly regular basis i make more in a
day than many people will make in their lifetime another side note in today's fast changing
world it's not so much what you know anymore that counts because often what you know is
old it is how fast you learn that skill is priceless it's priceless in finding faster
formulas recipes if you will for making dough working hard for money is an old
formula born in the day of cavemen five pay yourself first the power of
self-discipline if you cannot get control of yourself do not try to get rich it makes no
sense to invest make money and blow it it is the lack of self-discipline that causes most lottery
winners to go broke soon after winning millions it is the lack of self-discipline that causes
people who get a raise to immediately go out and buy a new car or take a cruise it is difficult
to say which of the 10 steps is the most important but of all the steps this step is
probably the most difficult to master if it is not already a part of your makeup i
would venture to say that personal self-discipline is the number one delineating factor between
the rich the poor and the middle class simply put people who have low self-esteem and low
tolerance for financial pressure can never be rich as i have said a lesson learned from my rich
dad was that the world will push you around the world pushes people around not because other
people are bullies but because the individual lacks internal control and discipline people who
lack internal fortitude often become victims of those who have self-discipline in the entrepreneur
classes i teach i constantly remind people to not focus on their product service or widget
but to focus on developing management skills the three most important management skills
necessary to start your own business are management of one cash flow
two people three personal time i would say the skills to manage
these three apply to anything not just entrepreneurs the three matter in
the way you live your life as an individual or as part of a family a business a
charitable organization a city or a nation each of these skills is enhanced by the mastery
of self-discipline i do not take the saying pay yourself first lightly the statement pay yourself
first comes from george clayson's book the richest man in babylon millions of copies have been sold
but while millions of people freely repeat that powerful statement few follow the advice as i
said financial literacy allows one to read numbers and numbers tell the story by looking at a
person's income statement and balance sheet i can readily see if people who spout the words pay
yourself first actually practice what they preach in reality each month many allocate money
to their asset column before they pay their monthly expenses although millions of people have
read clayson's book and understand the words pay yourself first in reality they pay themselves last
now i can hear the howls from those of you who sincerely believe in paying your bills first and i
can hear all the responsible people who pay their bills on time i am not saying be irresponsible and
not pay your bills all i am saying is do what the book says which is pay yourself first if you can
truly begin to understand the power of cash flow you will soon realize why ninety percent
of people work hard all their lives and need government support like social
security when they are no longer able to work kim and i have had many bookkeepers accountants
and bankers who have had a major problem with this way of looking at pay yourself first the reason
is that these financial professionals actually do what the masses do they pay themselves
last there have been times in my life when for whatever reason cash flow was far less than
my bills i still paid myself first my accountant and bookkeeper screamed in panic they're
going to come after you the irs is going to put you in jail you're going to ruin your credit
rating they'll cut off the electricity i still paid myself first why you ask because that's
what the story the richest man in babylon was all about the power of self-discipline
and the power of internal fortitude as my rich dad taught me the first month i worked for him
most people allow the world to push them around a bill collector calls and you pay or else a sales
clerk says oh just put it on your charge card your real estate agent tells you go ahead the
government allows you a tax deduction on your home that is what the book is really about having
the guts to go against the tide and get rich you may not be weak but when it comes to
money many people get wimpy i am not saying be irresponsible the reason i don't have high
credit card debt and doodad debt is because i pay myself first the reason i minimize my income is
because i don't want to pay it to the government that is why my income comes from my asset column
through a nevada corporation if i work for money the government takes it although i pay my
bills last i am financially astute enough to not get into a tough financial situation i don't
like consumer debt i actually have liabilities that are higher than ninety nine percent of the
population but i don't pay for them other people pay for my liabilities they're called tenants
so rule number one in paying yourself first is don't get into debt in the first place although i
pay my bills last i set it up to have only small unimportant bills that are due when i
occasionally come up short i still pay myself first i let the creditors and even the
government scream i like it when they get tough why because those guys do me a favor they
inspire me to go out and create more money so i pay myself first invest the money and let
the creditors yell i generally pay them right away anyway kim and i have excellent credit
we just don't cave into pressure and spend our savings or liquidate stocks to pay for consumer
debt that is not too financially intelligent to successfully pay yourself
first keep the following in mind one don't get into large debt positions that you
have to pay for keep your expenses low build up assets first then buy the big house or nice car
being stuck in the rat race is not intelligent two when you come up short let the pressure build
and don't dip into your savings or investments use the pressure to inspire your financial genius
to come up with new ways of making more money and then pay your bills you will have increased
your ability to make more money as well as your financial intelligence so many times i have
gotten into financial hot water and used my brain to create more income while staunchly
defending the assets in my asset column my bookkeeper has screamed and dived for cover but
i was like a good soldier defending the fort fort assets poor people have poor habits a common bad
habit is innocently called dipping into savings the rich know that savings are only used to create
more money not to pay bills i know that sounds tough but as i said if you're not tough inside
the world will always push you around anyway if you do not like financial pressure
then find a formula that works for you a good one is to cut expenses
put your money in the bank pay more than your fair share of income tax buy
safe mutual funds and take the vow of the average but this violates the pay yourself first rule
this rule does not encourage self-sacrifice or financial abstinence it doesn't mean pay yourself
first and starve life was meant to be enjoyed if you call on your financial genius you can
have all the goodies of life get rich and pay bills and that is financial intelligence
six pay your brokers well the power of good advice sometimes i see people posting a sign in
front of their house that says for sale by owner or i see people on tv claiming to be discount
brokers my rich dad taught me to take the opposite approach he believed in paying professionals
well and i have adopted that policy also today i have expensive attorneys accountants
real estate brokers and stock brokers why because if and i do mean if the people are
professionals their services should make you money and the more money they make the more money i
make we live in the information age information is priceless a good broker should provide you with
information as well as take the time to educate you i have several brokers who do that for me some
taught me when i had little or no money and i am still with them today what i pay a broker is tiny
in comparison with what kind of money i can make because of the information they provide i love
it when my real estate broker or stockbroker makes a lot of money because that usually means
i made a lot of money a good broker saves me time in addition to making me money like when i
bought the vacant land for nine thousand dollars and sold it immediately for over twenty five
thousand dollars so i could buy my porsche quicker a broker is my eyes and ears in the market they're
there every day so i do not have to be i'd rather play golf people who sell their house on their own
must not value their time much why would i want to save a few bucks when i could use that time to
make more money or spend it with those i love what i find funny is that so many poor and middle
class people insist on tipping restaurant help 15 to 20 percent even for bad service but complain
about paying a broker three to seven percent they enjoyed tipping people in the expense column and
stiffing people in the asset column that is not financially intelligent keep in mind that not
all brokers are created equal unfortunately most brokers are only sales people they sell but they
themselves own little or no real estate there is a tremendous difference between a broker who sells
houses and a broker who sells investments the same is true for stock bond mutual fund and insurance
brokers who call themselves financial planners when i interview any paid professional
i first find out how much property or stocks they personally own and
what percentage they pay in taxes and that applies to my tax attorney as well
as my accountant i have an accountant who minds his own business his profession is
accounting but his business is real estate i used to have an accountant who was a small
business accountant but he had no real estate i switched because we did not love the same business
find a broker who has your best interests at heart many brokers will spend the time educating
you and they could be the best asset you find just be fair and most of them will be fair to
you if all you can think about is cutting their commissions then why should they want to help you
it's just simple logic as i said earlier one of the management skills is the management of people
many people only manage people they feel smarter than and they have power over many middle managers
remain middle managers failing to get promoted because they know how to work with people below
them but not with people above them the real skill is to manage and reward the people who are
smarter than you in some technical area that is why companies have a board of directors you
should have one too that is financial intelligence seven be an indian giver the power of getting
something for nothing when the first european settlers came to america they were taken aback
by a cultural practice some american indians had for example if a settler was cold the
indian would give the person a blanket mistaking it for a gift the settler was often
offended when the indian asked for it back the indians also got upset when they realized
that settlers did not want to give it back that is where the term indian giver came from
a simple cultural misunderstanding in the world of the asset column being an indian giver is
vital to wealth the sophisticated investors first question is how fast do i get my money back
they also want to know what they get for free also called a piece of the action that is why
the roi or return on investment is so important for example i found a small condominium that was
in foreclosure a few blocks from where i lived the bank wanted sixty thousand dollars and
i submitted a bid for fifty thousand dollars which they took simply because along with my bid
was a cashier's check for fifty thousand dollars they realized i was serious most investors
would say aren't you tying up a lot of cash would it not be better to get a loan on it the
answer is not in this case my investment company uses this condominium as a vacation rental in the
winter months when the snow birds come to arizona it rents for two thousand five hundred dollars
a month for four months out of the year for rental during the off season it rents
for only one thousand dollars a month i had my money back in about three years now
i own this asset which pumps money out for me month in and month out the same is done with
stocks frequently my broker calls and recommends i move a sizable amount of money into the stock of a
company that he feels is just about to make a move that will add value to the stock like announcing
a new product i will move my money in for a week to a month while the stock moves up then i pull my
initial dollar amount out and stop worrying about the fluctuations of the market because my initial
money is back and ready to work on another asset so my money goes in and then it comes out
and i own an asset that was technically free true i have lost money on many occasions but
i only play with money i can afford to lose i would say on an average 10 investments i hit
home runs on two or three while five or six do nothing and i lose on two or three but i limit my
losses to only the money i have in at that time people who hate risk put their money in the bank
in the long run safe savings are better than no savings but it takes a long time to get your money
back and in most instances you don't get anything for free with it on every one of my investments
there must be an upside something for free like a condominium a mini storage a piece of free
land a house stock shares or an office building and there must be limited risk or a low risk idea
there are books devoted entirely to this subject so i will not talk about it here ray kroc of
mcdonald's fame sold hamburger franchises not because he loved hamburgers but because he wanted
the real estate under the franchise for free so wise investors must look at more
than roi they look at the assets they get for free once they get their money
back that is financial intelligence eight use assets to buy luxuries
the power of focus a friend's child has been developing a nasty habit of burning a
hole in his pocket just 16 he wanted his own car the excuse all his friends parents gave their
kids cars the child wanted to go into his savings and use it for a down payment that was when
his father called me and then came to see me do you think i should let him do
it or should i just buy him a car i answered it might relieve the pressure in
the short term but what have you taught him in the long term can you use this desire to own
a car and inspire your son to learn something suddenly the lights went on and he hurried home
two months later i ran into my friend again does your son have his new car i asked no he doesn't
but i gave him three thousand dollars for the car i told him to use my money instead of his college
money well that's generous of you i said not really the money came with a hitch so what was the
hitch i asked well first we played your cash flow game we then had a long discussion about the wise
use of money after that i gave him a subscription to the wall street journal and a few books on the
stock market then what i asked what was the catch i told him that three thousand dollars was his
but he could not directly buy a car with it he could use it to find a stock broker and buy and
sell stocks once he had made six thousand dollars with the three thousand dollars the money would
be his for the car and the three thousand dollars would go into his college fund and what are the
results i asked well he got lucky early in his trading but lost everything a few days later then
he really got interested today i would say he is down two thousand dollars but his interest
is up he has read all the books i bought him and he's gone to the library to get more he reads
the wall street journal voraciously watching for indicators he's only got one thousand dollars
left but his interest and learning are sky high he knows that if he loses that money he walks
for two more years but he does not seem to care he even seems uninterested in getting a car
because he's found a game that is more fun what happens if he loses all the money i asked
we'll cross that bridge when we get to it i'd rather have him lose everything now than wait
till he's our age to risk losing everything and besides that is the best three thousand
dollars i've ever spent on his education what he is learning will serve him for life and he
seems to have gained a new respect for the power of money as i said earlier if a person cannot
master the power of self-discipline it is best not to try to get rich i say this because although
the process of developing cash flow from an asset column is easy in theory what's hard is the mental
fortitude to direct money to the correct use due to external temptations it is much easier in
today's consumer world to simply blow money out the expense column with weak mental fortitude that
money flows into the paths of least resistance that is the cause of poverty and financial
struggle the following example illustrates the financial intelligence needed
to direct money to make more money if we give one hundred people ten thousand dollars
at the start of the year i believe that at the end of the year 80 would have nothing left in fact
many would have created greater debt by making a down payment on a new car refrigerator electronics
or a holiday sixteen would have increased that ten thousand dollars by five to ten percent four would
have increased it to twenty thousand dollars or into the millions we go to school to learn a
profession so we can work for money it is my opinion that it's just as important to learn how
to have money work for you i love my luxuries as much as anyone else the difference is i don't buy
them on credit it's the keep up with the jones's trap when i wanted to buy a porsche the easy road
would have been to call my banker and get a loan instead of choosing to focus in the liability
column i chose to focus in the asset column as a habit i use my desire to consume to inspire
and motivate my financial genius to invest too often today we focus on borrowing money
to get the things we want instead of focusing on creating money one is easier in the
short term but harder in the long term it's a bad habit that we as
individuals and as a nation have gotten into remember the easy road often
becomes hard and the hard road often becomes easy the earlier you can train yourself and
those you love to be masters of money the better money is a powerful force unfortunately
people use the power of money against themselves if your financial intelligence is low money will
run all over you it will be smarter than you if money is smarter than you you will work
for it all your life to be the master of money you need to be smarter than it then money
will do as it is told it will obey you instead of being a slave to it you will be the
master of it that is financial intelligence nine choose heroes the power of myth when
i was a kid i greatly admired willie mays hank aaron and yogi berra they were my
heroes and i wanted to be just like them i treasured their baseball cards i knew their
stats the rbis the eras their batting averages how much they got paid and how
they came up from the minor leagues as a nine-year-old kid when i stepped up to bat
or played first base or catcher i wasn't me i pretended i was a famous baseball player it's
one of the most powerful ways we learn and we often lose that as adults we lose our heroes today
i watch young kids playing basketball near my home on the court they're not little johnny they're
pretending to be their favorite basketball hero copying or emulating heroes is true power
learning i have new heroes as i grow older i have golf heroes and i copy their swings and
do my best to read everything i can about them i also have heroes such as donald trump warren
buffett peter lynch george soros and jim rogers i know their stats just like i knew the eras and
rbis of my childhood baseball heroes i follow what warren buffett invests in and i read anything i
can about his point of view on the market and how he chooses stocks and i read about donald trump
trying to find out how he negotiates and puts deals together just as i was not me when i was up
to bat when i'm in the market or i'm negotiating a deal i am subconsciously acting with the bravado
of trump or when analyzing a trend i look at it as the warren buffett we're doing it by having heroes
we tap into a tremendous source of raw genius but heroes do more than simply inspire us
heroes make things look easy making it look easy convinces us to want to be just like them
if they can do it so can i when it comes to investing too many people make it sound hard
instead find heroes who make it look easy 10 teach and you shall receive the power of
giving both of my dads were teachers my rich dad taught me a lesson i have carried all my life
the necessity of being charitable or giving my educated dad gave a lot of his time and knowledge
but almost never gave away money he usually said that he would give when he had some extra
money but of course there was rarely any extra my rich dad gave money as well as education he
believed firmly in tithing if you want something you first need to give he would always say when
he was short of money he gave money to his church or to his favorite charity if i could leave one
single idea with you it is that idea whenever you feel short or in need of something give what
you want first and it will come back in buckets that is true for money a smile love or friendship
i know it is often the last thing a person may want to do but it has always worked for me i trust
that the principle of reciprocity is true and i give what i want i want money so i give money and
it comes back in multiples i want sales so i help someone else sell something and sales come to me i
want contacts and i help someone else get contacts like magic contacts come to me i heard a saying
years ago that when god does not need to receive but humans need to give my rich dad would often
say poor people are more greedy than rich people he would explain that if a person was rich that
person was providing something that other people wanted in my life whenever i have felt needy or
short of money or short of help i simply went out or found in my heart what i wanted and decided
to give it first and when i gave it always came back it reminds me of the story of the guy sitting
with firewood in his arms on a cold freezing night he is yelling at the potbellied stove when you
give me some heat then i'll put some wood in you and when it comes to money love happiness sales
and contacts all one needs to remember is to give first often just the process of thinking of what
i want and how i could give that to someone else breaks free a torrent of bounty whenever i feel
that people aren't smiling at me i simply begin smiling and saying hello like magic the next
thing i know i'm surrounded by smiling people it is true that your world is only a mirror of you
so that's why i say teach and you shall receive i have found that the more i teach those who want
to learn the more i learn if you want to learn about money teach it to someone else a torrent
of new ideas and finer distinctions will come in there are times when i have given and nothing
has come back or what i have received is not what i wanted but upon closer inspection and
soul-searching i was often given to receive in those instances instead of giving for the joy
that giving itself brings my dad taught teachers and he became a master teacher my rich dad always
taught young people his way of doing business in retrospect it was their generosity with
what they knew that made them smarter there are powers in this world that are much smarter
than we are you can get there on your own but it's easier with the help of the powers that
be you only need to be generous with what you have chapter 9 still want more here are some to do's many people may not be satisfied with my 10 steps
they see them more as philosophies than actions i think understanding the philosophy is just as
important as the action there are many people who want to do instead of think and then
there are people who think but do not do i would say that i am both i love new ideas and
i love action so for those who want a to-do list on how to get started i will share with you
some of the things i do in abbreviated form stop doing what you're doing in other
words take a break and assess what is working and what is not working the definition
of insanity is doing the same thing over and over and expecting a different result stop doing
what is not working and look for something new look for new ideas for new investing ideas i go
to bookstores and search for books on different and unique subjects i call them formulas i buy
how-to books on formulas i know nothing about for example in the bookstore i found the book the
16 solution by joel moskowitz i bought the book and read it and the next thursday i did
exactly as the book said most people do not take action or they let someone talk them
out of whatever new formula they are studying my neighbor told me why 16 percent would not work
i did not listen to him because he's never done it find someone who has done what you want to do take
them to lunch and ask them for tips and tricks of the trade as for 16 percent tax lien certificates
i went to the county tax office and found the government employee who worked in that office i
found out that she too invested in the tax liens immediately i invited her to lunch she was
thrilled to tell me everything she knew and how to do it after lunch she spent all
afternoon showing me everything by the next day i found two great properties with her help that have
been accruing interest at 16 ever since it took a day to read the book a day to take action and hour
for lunch and a day to acquire two great deals take classes read and attend seminars i
search newspapers and the internet for new and interesting classes many of which are free or
inexpensive i also attend and pay for expensive seminars on what i want to learn i am wealthy
and free from needing a job simply because of the courses i took i have friends who did not take
those classes who told me i was wasting my money and yet they're still at the same job make lots of
offers when i want a piece of real estate i look at many properties and generally write an offer if
you don't know what the right offer is neither do i that is the job of the real estate agent they
make the offers i do as little work as possible a friend wanted me to show her how to buy
apartment houses so one saturday she her agent and i went and looked at six apartment houses four
were dogs but two were good i said to write offers on all six offering half of what the owners asked
for she and the agent nearly had heart attacks they thought it was rude and would offend
the sellers but i really don't think the agent wanted to work that hard so they did
nothing and went on looking for a better deal no offers were ever made and that person is
still looking for the right deal at the right price well you don't know what the right price is
until you have a second party who wants to deal most sellers ask too much it is rare that a seller
asks a price that is less than something is worth moral of the story make offers people who are
not investors have no idea what it feels like to try to sell something i have had a piece of real
estate that i wanted to sell for months i would have welcomed any offer they could have offered
me 10 pigs and i would have been happy not at the offer but just because someone was interested
i would have countered maybe for a pig farm in exchange but that's how the game works the game
of buying and selling is fun keep that in mind it's fun and only a game make offers someone might
say yes i always make offers with escape clauses in real estate i make an offer with language
that details subject-to contingencies such as the approval of a business partner never
specify who the business partner is most people don't know that my partner is my cat if
they accept the offer and i don't want the deal i call home and speak to my cat i make this
ridiculous statement to illustrate how absurdly easy and simple the game is so many people make
things too difficult and take it too seriously finding a good deal the right business the right
people the right investors or whatever is just like dating you must go to the market and talk
to a lot of people make a lot of offers counter offers negotiate reject and accept i know
single people who sit at home and wait for the phone to ring but it's better to go to
the market even if it's only the supermarket search offer reject negotiate and accept are all
parts of the process of almost everything in life jog walk or drive a certain area once a month
for 10 minutes i have found some of my best real estate investments doing this i will jog a certain
neighborhood for a year and look for change for there to be profit in a deal there must
be two elements a bargain and change there are lots of bargains but it's change that
turns a bargain into a profitable opportunity so when i jog i jog a neighborhood i might like
to invest in it is the repetition that causes me to notice slight differences i notice real estate
signs that are up for a long time that means the seller might be more agreeable to deal i watch for
moving trucks going in or out i stop and talk to the drivers i talk to the postal carriers it's
amazing how much information they acquire about an area i find a bad area especially an area
that the news has scared everyone away from i drive it for sometimes a year waiting for signs
of something changing for the better i talk to retailers especially new ones and find out why
they're moving in it takes only a few minutes a month and i do it while doing something else
like exercising or going to and from the store shop for bargains in all markets consumers will
always be poor when the supermarket has a sale say on toilet paper the consumer runs in and stocks
up but when the housing or stock market has a sale most often called a crash or correction the
same consumer often runs away from it when the supermarket raises its prices the consumer
shops somewhere else but when housing or the stock market raises their prices the same
consumer often rushes in and starts buying always remember profits are made in the buying
not in the selling look in the right places a neighbor bought a condominium for one hundred
thousand dollars i bought the identical condo next door for fifty thousand dollars he told
me he's waiting for the price to go up i told him that profit is made when you buy not when
you sell she shopped with a real estate broker who owns no property of her own i shopped at the
foreclosure auction i paid 500 for a class on how to do this my neighbor thought that the 500 for
a real estate investment class was too expensive he said he could not afford the money or
the time so he waits for the prices to go up look for people who want to buy first
then look for someone who wants to sell a friend was looking for a certain piece of land
he had the money but did not have the time i found a large piece of land larger than what my friend
wanted to buy tied it up with an option called my friend and he said he wanted a piece of it so
i sold the piece to him and then bought the land i kept the remaining land as mine for free moral
of the story buy the pie and cut it in pieces most people look for what they can afford so they
look too small they buy only a piece of the pie so they end up paying more for less small thinkers
don't get the big breaks if you want to get richer think big think big retailers love giving volume
discounts simply because most business people love big spenders so even if you're small you can
always think big when my company was in the market for computers i called several friends
and asked them if they were ready to buy also we then went to different dealers and negotiated
a great deal because we wanted to buy so many i have done the same with stocks small people
remain small because they think small act alone or don't act at all learn from history all the
big companies on the stock exchange started out as small companies colonel sanders did not get
rich until after he lost everything in his 60s bill gates was one of the richest men in the world
before he was thirty action always beats inaction these are just a few of the things i have done
and continue to do to recognize opportunities the important words are have done and do as
repeated many times throughout this audiobook you must take action before you can
receive the financial rewards act now final thoughts i would like to share some
final thoughts with you the main reason i wrote this book and the reason it has remained
a bestseller since 2000 was to share insights into how increased financial intelligence can
be used to solve many of life's common problems without financial training we all too often
use the standard formulas to get through life work hard save borrow and pay excessive taxes
today more than ever we need better information i use the following story as an example of a
financial problem that confronts many young families today how do you afford a good
education for your children and provide for your own retirement it requires using
financial intelligence instead of hard work a friend of mine was griping one day about
how hard it was to save money for his four children's college educations he was putting three
hundred dollars away in a college fund each month and had so far accumulated only
about twelve thousand dollars he had about twelve more years to save for college
since his oldest child was then six years old at the time the real estate market in phoenix
was terrible people were giving houses away i suggested to my friend that he buy a house
with some of the money in his college fund the idea intrigued him and we began to discuss
the possibility his primary concern was that he did not have credit with the bank to buy another
house since he was so overextended i assured him that there were other ways to finance a property
rather than through the bank we looked for a house for two weeks a house that would fit all
our criteria there were plenty to choose from so shopping was fun finally we found a three
bedroom two bath home in a prime neighborhood the owner had been downsized and needed to sell
that day because he and his family were moving to california where another job waited the
owner wanted one hundred two thousand dollars but we offered only seventy nine thousand dollars
he took it immediately and agreed to carry back the loan with a ten percent down payment all my
friend had to come up with was seven thousand nine hundred dollars as soon as the owner moved
my friend put the house up for rent after all expenses were paid including the mortgage
he put 125 dollars in his pocket each month his plan was to keep the house for 12 years and
let the mortgage get paid down faster by applying the extra 125 dollars to the principal
each month we figured that in 12 years a large portion of the mortgage would be paid off
and he could possibly be clearing 800 a month by the time his first child went to college he could
also sell the house if it had appreciated in value three years later the real estate market greatly
improved in phoenix and he was offered 156 thousand dollars for the same house by the tenant
who lived in it again he asked me what i thought i advised that he sell it using a 1031 tax
deferred exchange suddenly he had nearly eighty thousand dollars to operate with i called another
friend in austin texas who then moved this tax deferred capital gain into a mini storage facility
within three months he began receiving checks for a little less than one thousand dollars a month
which he then poured back into the college fund a couple of years later the mini warehouse
sold and he received a check for nearly 330 000 as proceeds from the sale he rolled those funds
into a new project that would now generate over three thousand dollars a month in income again
going into the college fund he is now very confident that his goal will be met easily it only
took seven thousand nine hundred dollars to start and a little financial intelligence his children
will be able to afford the education they want and he will then use the underlying asset wrapped
in his legal entity to pay for his retirement as a result of this successful investment
strategy he will be able to retire early thank you for listening to this audiobook i hope
it has provided some insights into utilizing the power of money to work for you today we need
greater financial intelligence to simply survive the idea that it takes money to make money is the
thinking of financially unsophisticated people it does not mean that they're not intelligent
they have simply not learned the science of money making money money is only an idea if you
want more money simply change your thinking every self-made person started small with an idea and
then turned it into something big the same applies to investing it takes only a few dollars to start
and grow it into something big i meet so many people who spend their lives chasing the big
deal or trying to amass a lot of money to get into a big deal but to me that is foolish too
often i have seen unsophisticated investors put their large nest egg into one deal and lose most
of it rapidly they may have been good workers but they were not good investors education
and wisdom about money are important start early buy a book go to a seminar practice
start small i turned five thousand dollars cash into a one million dollar asset producing
five thousand dollars a month cash flow in less than six years but i started learning as a kid i
encourage you to learn because it's not that hard in fact it's pretty easy once you get the hang
of it i think i have made my message clear it's what is in your head that determines what is in
your hands money is only an idea there is a great book called think and grow rich the title is not
work hard and grow rich learn to have money work hard for you and your life will be easier and
happier today don't play it safe play it smart the three incomes in the world of accounting there
are three different types of income one ordinary earned two portfolio three passive when my poor
dad said to me go to school get good grades and find a safe secure job he was recommending i work
for earned income when my rich dad said the rich don't work for money they have their money work
for them he was talking about passive income and portfolio income passive income in most cases
is income derived from real estate investments portfolio income is income derived from paper
assets such as stocks and bonds portfolio income is the income that makes bill gates the
richest man in the world not earned income rich dad used to say the key to becoming
wealthy is the ability to convert earned income into passive income or portfolio
income as quickly as possible he would say taxes are highest on earned income the
least taxed income is passive income that is another reason why you want
your money working hard for you the government taxes the income you work hard for
more than the income your money works hard for in my second book rich dad's cash
flow quadrant i explain the four different types of people who make up the
world of business they are e employee s self-employed b business owner and i investor most
people go to school to learn to be an e or an s the cash flow quadrant is written about the core
differences of these four types and how people can change their quadrant in fact most of our products
are created for people in the b and i quadrants in rich dad's guide to investing book number three
in the rich dad series i go into more detail on the importance of converting earned income into
passive and portfolio income rich dad used to say all a real investor does is convert earned
income into passive and portfolio income if you know what you're doing investing
is not risky it's just common sense the key to financial freedom the key
to financial freedom and great wealth is a person's ability to convert earned income
into passive and or portfolio income my rich dad spent a lot of time teaching mike and me
this skill having this ability is the reason my wife kim and i are financially free never
needing to work again we continue to work because we choose to today we own a real
estate investment company for passive income and participate in private placements and initial
public offerings of stock for portfolio income we also went back to work to build a financial
education company so that we can continue to create and publish books and games all of our
educational products are created to teach the same skills my rich dad taught me the skills
of converting earned income into passive and portfolio income the games we create are important
because they teach what books cannot teach for example you would never learn to
ride a bicycle by only reading a book our cash flow games for adults and cash
flow for kids game are designed to teach players the basic investment skills of converting
earned income into passive and portfolio income they also teach the principles of accounting
and financial literacy these games are the only educational products in the world that
teach people all of these skills simultaneously cash flow 202 is the advanced version of cash flow
101 and requires the game board from 101 as well as a full understanding of 101 before it can be
played cash flow 101 and cash flow for kids teach the principles of fundamental investing cash flow
202 teaches the principles of technical investing technical investing involves advanced trading
techniques such as short selling call options put options and straddles a person who understands
these advanced techniques is able to make money when the market goes up as well as when the
market comes down as my rich dad would say a real investor makes money in an up market and a
down market that is why they make so much money one of the reasons they make more money is
simply because they have more self-confidence rich dad would say they have more self-confidence
because they are less afraid of losing in other words the average investor does not
make as much money because they are so afraid of losing money the average investor does not
know how to protect themselves from losses and that is what cash flow 202 teaches average
investors think investing is risky because they have not been formally trained to be
professional investors as warren buffett america's richest investor says risk comes from
not knowing what you're doing my board games teach the simple basics of fundamental investing and
technical investing while people are having fun i occasionally hear someone say your educational
games are expensive which poses the question of roi the return on investment or the value returned
for the price paid i nod my head in reply yes they may be expensive especially when compared to
entertainment board games but my games are not as expensive as a college education working hard all
your life for earned income paying excessive taxes and then living in terror of losing all
of your money in the investment markets when someone walks away mumbling about the price i
can hear my rich dad saying if you want to be rich you must know what kind of income to work hard
for how to keep it and how to protect it from loss that is the key to great wealth rich dad would
also say if you do not understand the differences in those three incomes and do not learn the
skills on how to acquire and protect those incomes you will probably spend your life earning
less than you could and working harder than you should my poor dad thought a good education
a good job and years of hard work were all you needed to be successful my rich dad also
thought a good education was important but to him it was also important that mike and
i know the differences in the three incomes and what kind of income to work hard for
to him that was basic financial education knowing the differences in the three incomes
and learning the investment skills of how to acquire the different incomes is basic education
for anyone who strives to acquire great wealth and achieve financial freedom a special kind
of freedom that only a few will ever know as rich dad states in lesson number one the rich
do not work for money they know how to have money work hard for them rich dad said earned income
is money you work for and passive and portfolio income is money working for you knowing that
little difference has been significant in my life or as robert frost ends his poem
and that has made all the difference take action all of you were given two great
gifts your mind and your time it is up to you to do what you please with both with each
dollar bill that enters your hand you and only you have the power to determine your destiny
spend it foolishly and you choose to be poor spend it on liabilities and you join the middle
class invest it in your mind and learn how to acquire assets and you will be choosing wealth as
your goal and your future the choice is yours and only yours every day with every dollar you decide
to be rich poor or middle class choose to share this knowledge with your children and you choose
to prepare them for the world that awaits no one else will you and your children's future will be
determined by choices you make today not tomorrow i wish you great wealth and much happiness with
this fabulous gift called life robert kiyosaki